TCS Q1 FY26: Profit Up 4.4%, Declares ₹11 Dividend
Tata Consultancy Services posts a resilient Q1FY26 with higher profitability, even as revenue dips 1.6% QoQ due to currency fluctuations and macro uncertainties; shareholders rewarded with ₹11 per share interim dividend.
Summary:
Tata Consultancy Services (TCS) reported a 4.4% sequential rise in net profit at ₹12,760 crore for the first quarter of FY26, even as revenue fell 1.6% to ₹63,437 crore. Revenue in dollar terms also slipped marginally to $7.42 billion. Despite macroeconomic headwinds, the IT giant managed to protect margins and declared an interim dividend of ₹11 per share, signaling strong fundamentals and shareholder commitment.
TCS Q1 FY26 Results: Profit Up, Revenue Down — A Mixed Start to the Fiscal Year
India’s largest IT services company, Tata Consultancy Services (TCS), kicked off the new fiscal year with a mixed performance. For the quarter ended June 30, 2025 (Q1FY26), the company reported a net profit of ₹12,760 crore, marking a 4.4% quarter-on-quarter (QoQ) increase from ₹12,434 crore reported in Q4FY25.
However, consolidated revenue from operations fell 1.6% sequentially to ₹63,437 crore, down from ₹64,479 crore in the previous quarter. On a year-on-year (YoY) basis, revenue grew marginally, reflecting the overall resilience of the IT sector amid global macroeconomic turbulence.
Revenue in Dollar Terms Shows Marginal Contraction
TCS reported revenues of $7.421 billion, reflecting a 0.6% decrease quarter-over-quarter from the previous $7.465 billion. This drop was largely attributed to currency headwinds and slower decision-making cycles in key markets like the US and Europe.
TCS CFO Samir Seksaria noted that the revenue decline was partly seasonal, coupled with some softness in discretionary spending across sectors like retail, BFSI (Banking, Financial Services & Insurance), and manufacturing. Despite these challenges, the company managed to maintain its operational efficiency, which contributed to margin stability and profit growth.
Dividend Declaration: ₹11 Interim Dividend for Shareholders
TCS has announced an interim dividend of ₹11 per share, reaffirming its dedication to benefiting shareholders. The record date for the dividend payout is set for July 20, 2025, and the payment will be made on or before August 5, 2025.
This dividend announcement aligns with TCS’s track record of consistent shareholder returns and strong cash generation, further underscoring the financial stability of the company despite revenue headwinds.
Key Financial Metrics – Q1 FY26 vs Q4 FY25
Particulars Q1 FY26 Q4 FY25 Change (QoQ)
Revenue (₹ crore) 63,437 64,479 -1.6%
Net Profit (₹ crore) 12,760 12,434 +4.4%
Revenue ($ million) 7,421 7,465 -0.6%
Operating Margin ~24.2% (Est.) ~23.9% (Est.) +30 bps approx.
Dividend per Share ₹11 ₹28 (Final FY25) –
Operational Performance & Segment Highlights
Despite the revenue contraction, TCS reported strong deal wins across key geographies, particularly in North America and the UK. The total contract value (TCV) for Q1FY26 stood at $10.2 billion, signaling robust client demand for cost-optimization and digital transformation initiatives.
Geographical Insights:
North America: Saw marginal weakness in discretionary spending.
UK & Continental Europe: Demonstrated relatively better demand resilience.
India: Continued momentum in government and public sector projects.
Vertical Performance:
The BFSI sector continues to face challenges due to postponed approvals for IT budgets.
Retail & CPG: Softness due to reduced discretionary tech spending.
Healthcare & Life Sciences: A standout performer with double-digit growth.
Manufacturing: Slight decrease due to temporary softness in demand.
Commentary from Management
K Krithivasan, the Chief Executive Officer and Managing Director of TCS, commented:
“We’ve started FY26 on a solid note with strong profitability and healthy deal wins. While the revenue softness is concerning, especially in BFSI and retail, we remain optimistic about the second half of the fiscal year as client confidence improves.”
He further emphasized the company’s commitment to AI investments, including GenAI labs and partnerships, as critical growth drivers in the upcoming quarters.
Hiring & Attrition Trends
In a positive sign for the IT workforce, TCS reported:
Net headcount addition of 2,200 employees.
LTM (Last Twelve Months) attrition rate declined to 13.4%, down from 14.7% in Q4FY25.
The management stated that fresher onboarding and lateral hiring would continue in a calibrated manner based on project pipelines and client requirements.
Analyst & Market Reaction
Market analysts had a muted to slightly positive outlook on the Q1 results. While the revenue decline was anticipated due to seasonality, the profit beat and margin improvement came as a positive surprise.
Brokerages like Motilal Oswal, ICICI Securities, and Axis Capital maintained a ‘Buy’ to ‘Hold’ rating, with a 12-month target price in the range of ₹4,200–₹4,500, depending on future deal conversion and margin sustainability.
Outlook for FY26
With macro pressures expected to persist in the short term, TCS aims to:
Strengthen its AI and cloud offerings.
Focus on operational efficiencies to protect margins.
Invest in upskilling its workforce and enhancing automation across delivery centers.
The company’s robust order book and expanding GenAI services portfolio could help offset the ongoing demand challenges and currency fluctuations in global markets.
Conclusion
TCS’s Q1FY26 results reflect financial resilience and operational strength, despite headwinds in revenue. By sustaining profit growth and maintaining its dividend policy, the company reinforces its status as a bellwether of India’s IT industry. The next few quarters will be critical as TCS banks on its innovation pipeline and deal momentum to navigate a cautious global environment.
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