TCS profits not anticipated as staffing costs rise amid IT boom

TCS Q3 net profit up, but misses analysts’ estimates

Tata Consultancy Services Ltd reported earnings that beat analysts’ estimates as the IT services provider boosted hiring and paid more to retain workers during a technology boom brought on by the pandemic.

Asia’s largest software outsourcing provider’s net income rose to 97.7 billion rupees ($1.3 billion) in the December quarter, it said in a statement on Wednesday. Analysts have estimated an average of Rs 99.88 billion. Sales increased to Rs 488.9 billion. The company said that it will buy back the stock worth Rs 180 billion.

India’s top IT firm has bounced back from a deadly wave of Covid infections that has disrupted work in India and is now benefiting from a shift towards automation, cloud and e-commerce. Expenses are rising, although the internet boom has led to an increase in wages for tech talent.

What Bloomberg Intelligence Says

Boost spending on digital transformation and need for intensive IT savings will be the key drivers driving sales growth in the next 2-3 quarters. Tata’s base of approximately 529,000 employees makes it easy to cover any increased costs, helping it maintain industry-high operating margins of over 25%.

— Anurag Rana, Analyst

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Rival Infosys Ltd on Wednesday reported a 12% rise in profit and raised its revenue guidance for the year. The world’s top IT outsourcing firms have begun offering services such as cyber security, automation and machine-learning support for clients, diversifying from traditionally more labor-intensive backroom services. That expansion has driven up the cost of hiring and training employees in those new technologies, reducing margins.

TCS is the crown jewel of Tata Sons Limited, the holding company for one of India’s largest conglomerates. Its shares climbed 31% last year, and are up 3.25% this year.

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