(Bloomberg) -- Tata Consultancy Services Ltd., Asia’s largest software services provider, posted quarterly profit that beat analyst estimates after new cloud computing and mobile services helped shore up revenue.
Net income rose to 63.2 billion rupees ($944 million) in the three months ended June, the Mumbai-based company said Thursday. That compares with the 60.6 billion-rupee average of analyst estimates compiled by Bloomberg. Sales were 293 billion rupees, while analysts had projected 292.5 billion rupees.
Tata Consultancy is keeping costs low and taking advantage of its leadership in several key segments like financial services and retail, as Chief Executive Officer Natarajan Chandrasekaran seeks to bolster revenues. Like closest rival Infosys Ltd., the company is also reducing its reliance on traditional outsourcing.
“They have good order book positions. They will be able to manage volume growth,” said Sarabjit Kour Nangra, vice president, research at Angel Broking Ltd.
Slowing industry growth, a transition into digital services and pricing and margin pressures as well as recent macro issues like Brexit have added to the uncertainty for India’s IT services companies such as TCS and Infosys Ltd.
Britain’s vote to exit the European Union has brought on currency and volume related risks that could linger, analysts at Jefferies Group LLC said in a report.
“This also puts a question on protectionist policies, rhetoric on which is also possible in the U.S. given election year,’ Jefferies said, noting that Indian companies have been nimble enough to readjust in similar situations in the past.
TCS, which generates more than a quarter of its sales from Europe, has a track record of investing in new segments and markets such as the Nordic region and Japan. The company has also pushed into automation, which suggests it won’t be blindsided by changing trends, according to Ambit Capital Pvt.
Shares of Tata Consultancy rise 1.2 percent before the earnings were announced, compared with a 0.5 percent rise in the benchmark S&P BSE Sensex. TCS is the first of the major Indian IT companies to report earnings, with Infosys Ltd. results due on Friday.
TCS’ quarterly growth has been trailing its smaller Indian rival Infosys for the past four quarters.
Competitors such as Accenture Plc and Infosys have made small but strategic acquisitions and investments in key areas like cloud services and security for both technology and talent, while TCS hasn’t been doing deals for automation or artificial intelligence companies to focus on building its own platforms. --With assistance from Siddharth Philip
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