TATA Consultancy Services (TCS) reported profit that topped analysts’ estimates, signalling corporations are resuming spending on projects to take advantage of technologies such as artificial intelligence.
Net income rose 9 per cent to 120.4 billion rupees (S$1.9 billion) in the first quarter through June. Analysts, on average, had projected a profit of 119.59 billion rupees. Sales climbed 5.4 per cent to 626.1 billion rupees.
TCS leads India’s nearly US$250 billion tech industry, which is betting on technologies such as AI and machine learning to get companies to spend more on their computer systems.
Slowing global economies and conflicts including Russia’s persistent war on Ukraine have made corporations cautious with their investment decisions.
Shares of TCS closed up 0.4 per cent in Mumbai before the earnings were announced, and have gained 3.4 per cent this year on expectations IT spending will soon pick up.
TCS and rivals such as Infosys Ltd. emerged as outsourcing powerhouses a few decades ago by offering cheap back-office solutions to the world’s biggest corporations, giving rise to the term “Bangalored.”
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They have since moved up the value chain to become critical partners to companies in business transformation – and now seek further margin expansion by expanding into technologies such as AI, cloud and machine learning.
“Though weak economic conditions might hurt growth into fiscal 2025, which began Apr 1, TCS will likely benefit in the long term as companies spend more on digital initiatives and increase their offshore IT footprints,” Bloomberg Intelligence analysts Anurag Rana & Andrew Girard said.
“TCS can expand sales by the high-single to low-double digits in normal economic times.”
Among TCS’s partners is OpenAI-backer Microsoft Corp., and the outsourcer is betting on the relationship to develop AI-based software services for clients, chief executive officer K Krithivasan told Bloomberg News previously. BLOOMBERG