India's TCS Q3 misses view, flags challenges in Europe

Illustration shows Tata Consultanct Services logo

By Nallur and Sethuraman

BENGALURU (Reuters) -Tata Consultancy Services missed profit estimates and flagged challenges in Europe as clients tightened spending due to rough economic conditions, while its workforce shrank for the first time since the pandemic.

TCS is the first among its peers to report quarterly earnings, setting the tone for an industry that is seeing demand wane after a pandemic-fueled boom.

The Tata Group flagship said its employee count reduced by 2,197 on a net basis to 613,974 as on Dec. 31, its first such since the onset of the pandemic in the first quarter of fiscal year 2021. In the quarter ended September, TCS added 9,840 employees.

The company has since then slowed the pace of hiring amid fears of an economic recession in major western markets.

The Mumbai-based company's order book for the October-December period stood at $7.8 billion, down from $8.1 billion in the September quarter.

Market participants are keenly watching TCS for signals on the demand outlook for the sector, which is staring at the possibility of a recession in the U.S. and Europe from where it draws a bulk of its revenue.

The order wins reflect demand scenario, said Rajesh Gopinathan, chief executive officer and managing director of TCS.

"We are constructive on the U.S., cautious on Europe and positive on the U.K, but acknowledge it could be volatile. Our posture is positive," Gopinathan said.

Consolidated net profit for the three months ended Dec. 31 rose to 108.46 billion Indian rupees ($1.32 billion) from 97.69 billion rupees a year earlier, the company said in an exchange filing.

Analysts on an average expected a profit of 110.46 billion rupees, according to Refinitiv data.

Revenue from operations for the Dec. quarter rose 19.1%.

($1 = 82.3120 Indian rupees)

(Reporting by Nallur Sethuraman and Akash Sriram in Bengaluru; Editing by Dhanya Ann Thoppil)