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TCS Q1 FY26 results: Key takeaways for investors
- TCS experienced a negative 3.1% year-on-year constant currency revenue growth in Q1 FY26, the worst since Q2FY21, primarily due to the lack of follow-through from a large BSNL contract in the previous year leading to a 21% decline in the India business sector.
- Revenue weakness was observed not only in India but also across various geographies such as the US, the UK, and Continental Europe, with challenges expected to persist due to the slowing US economic growth and unresolved tariff wars.
- Although there was a 4% beat in EPS, driven by non-operating items, TCS missed revenue and operating profit expectations by 2% and 1% respectively. The company has been controlling costs, including delaying wage hikes, to support margins, which may become increasingly challenging over time.
- Investors need to be cautious, considering the CEO's note on delays in client decision-making intensifying in Q1. While there is hope for improved international business performance compared to last year, global economic challenges and potential industry structure changes in an AI world may impact TCS's growth trajectory.
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