(Bloomberg) — Tata Consultancy Services Ltd. reported profit that beat analysts’ forecasts after clients hired it for machine learning, cloud and other artificial intelligence-based projects to help them keep costs under control .
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Net profit rose 9% to 124.3 billion rupees ($1.5 billion) in the fourth quarter ended March. Analysts, on average, projected a profit of 120.3 billion rupees. Sales rose 3.5% to 612.4 billion rupees.
India’s nearly $250 billion technology industry, led by TCS, is trying to recover from a slowdown caused by foreign corporate clients cutting back on technology spending to cope with challenging economies. Conflicts, including Russia’s persistent war against Ukraine, have also created uncertainty for businesses.
This softness, however, may soon come to an end. As global economies show signs of normalizing, companies may be willing to spend more on technologies such as generative artificial intelligence, boosting the growth of Indian exporters of software services.
For years, Indian software companies have offered cheap back-office solutions to the world’s largest corporations, giving rise to the term “Bangalored”. But over the past few years, they have moved up the value chain to become essential partners for companies undergoing business transformation. TCS and its smaller Indian rivals are now betting on the rise of big data, AI, cloud and machine learning to achieve higher margins and accelerate growth.
What Bloomberg Intelligence says
Tata Consultancy Services’ fiscal 4Q24 sales growth in constant currency could be below 2% due to continued pressure on near-term projects despite enthusiasm for AI, based on sluggishness seen in peer results. We also anticipate management’s comments to echo Accenture’s March 21 concerns about tighter budgets, eliminating any hope of a rebound in new contract activity in the first half of calendar 2024. However, we remain optimistic about a recovery in spending in the second half, in easier comparisons and better economic clarity.
– Anurag Rana, analyst
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TCS, Asia’s largest outsourcer, is banking on its partnership with OpenAI backer Microsoft Corp. to develop AI-based software services for clients, targeting higher margins and faster growth, CEO K Krithivasan told Bloomberg News previously.
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