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The shares of Tata Consultancy Services Ltd. they advanced after the company predicted an increase in technology spending by corporations, indicating that a slowdown in the IT sector may be nearing an end.
While earnings for the third quarter through December missed analysts’ estimates, the Mumbai-based company said 2025 is looking better than last year. Shares rose as much as 4.7% for their biggest intraday gain since July.
TCS leads India’s $250 billion software services sector that helps global clients like Apple Inc. and Bank of America Corp. with business continuity, as well as offerings in cloud computing, automation and artificial intelligence. The industry is experiencing stagnation due to high interest rates and military conflicts around the world.
The company expects this year to be better than last year as customers are more confident in IT spending than in previous quarters and deal cycles are shortening, Chief Executive Officer K. Krithivasan said on a conference call of press in Bombay. These factors lead him to believe that customers will be more focused on higher-margin software services in the future, he said. The company is bullish on sectors such as banking and retail, he told Bloomberg TV.
JM Financial and Mirae Asset Securities were among the brokerages that raised their recommendations on TCS shares after the results.
Net income rose 12% to 123.8 billion rupees ($1.4 billion) in the three months to December. Analysts had expected 125.3 billion rupees on average, in a traditionally weak quarter for subcontractors. Sales rose 5.6% to 639.7 billion rupees.
The new year brings new challenges for corporations, including TCS, as Donald Trump takes office as the new US president, potentially fueling the debate over H-1B work visas used by Indian IT companies to send engineers and developers to their largest market. The U.S. Federal Reserve, which cut rates last month, expects high inflation and fewer rate cuts in 2025, factors that could weigh on customer sentiment.
TCS does not expect “any major disruption” to its business due to possible changes in H-1B rules in the US, as the company’s reliance on this visa is very low, Krithivasan said.
