Shares of Tata Consultancy Services (TCS), India’s largest IT services company, found themselves under pressure on April 11, 2025, following the release of its quarterly performance report for the March 2025 quarter. The company reported a 1.7% decline in net profit, which stood at Rs 12,224 crore, down from Rs 12,423 crore in the same quarter of the previous year. This profit contraction was primarily driven by margin pressures, despite a 6% growth in revenue for the fiscal year.

Stock Performance and Early Trade Trends

On April 11, TCS opened on a positive note at Rs 3,289.55 on the National Stock Exchange (NSE), compared to its previous close of Rs 3,246.60. However, the stock faced selling pressure almost immediately, touching an intraday low of Rs 3,212.10 despite the Nifty IT index gaining 1.75% in early trade. On the Bombay Stock Exchange (BSE), the stock initially opened at Rs 3,290, only to become the sole loser in the Sensex 30 pack during the early hours of trading.

As of the last update, the stock had recovered slightly to Rs 3,248.10, reflecting a modest gain of Rs 2 or 0.06%. This price movement highlights investor caution following the disappointing quarterly results, despite the overall growth in TCS’s annual performance.

Reasons Behind the Pressure on TCS Stock

The primary catalyst for the stock's performance in April 2025 appears to be a decline in profit margins, coupled with a wage hike deferral announcement for its 6.07 lakh employees. Despite posting a 4.2% increase in net profit for FY25, reaching Rs 48,553 crore, TCS’s quarterly results underperformed expectations, showing weaker-than-expected growth. The company indicated that this was largely due to margin contraction, which resulted in a 1 percentage point impact on the operating profit margin.

In addition to the profit margin contraction, the wage hike deferral due to business uncertainties stemming from the ongoing tariff issues with the United States further weighed on sentiment. K Krithivasan, Managing Director and CEO of TCS, acknowledged the uncertain business environment, attributing it to ongoing global trade tensions and delays in discretionary spending decisions by clients. This indicates the ongoing challenges in the IT sector, where businesses are adjusting to the current macroeconomic conditions.

TCS FY25 Performance and Outlook for FY26

Despite the quarterly setback, TCS reported a strong performance for the full fiscal year. The company’s revenue for FY25 grew by 6% to Rs 2.55 lakh crore, or over USD 30 billion. The company’s full-year net profit also grew by 4.2%, reflecting resilience despite the short-term setbacks.

Looking ahead, Krithivasan expressed optimism about FY26, stating that the company expects better revenue growth in the upcoming year. However, he also cautioned that business uncertainties and project ramp-downs could affect near-term performance, and that decision-making delays remain a significant challenge. Nevertheless, he emphasized that there had been no major project delays, reassuring investors of the company’s capacity to manage its project pipeline effectively.

Employee Hiring and Attrition Concerns

On the employment front, TCS maintained a strong hiring track record, having hired 42,000 freshers from campuses in FY25. The company indicated that it would continue or even increase the number of fresh hires in FY26 as it looks to expand its talent pool. Despite these efforts, the attrition rate at TCS rose slightly to 13.3%, up from the previous period, signaling potential concerns about talent retention in the competitive IT industry.

The company also reported that it promoted one-sixth of its workforce in the March quarter, which had a further impact on operating profit margins due to increased compensation costs.

TCS's Dividend and Long-Term Prospects

Amid these short-term pressures, TCS’s long-term prospects remain largely intact. The company continues to be one of the leaders in the Indian IT services industry, driven by its strong client base, vast global operations, and investment in cutting-edge technologies. Despite a challenging quarter, the company’s robust revenue base and strategic focus on digital transformation services continue to position it well for future growth.

The stock's performance may continue to be volatile in the short term, with investors keeping a close eye on global developments, especially the US-China tariff tensions, and their potential impact on the Indian IT sector. The deferred wage hikes could be a short-term hit to employee morale but may help the company navigate through uncertain times, focusing on cost containment.

Conclusion

TCS shares are facing downward pressure following a 1.7% dip in its net profit for the March 2025 quarter, driven by margin contraction and the deferral of wage hikes. Despite a solid 4.2% growth in annual net profit and 6% revenue growth for FY25, the stock’s performance was weighed down by operational challenges and global uncertainties. While the company expects a better FY26, investors should remain cautious and monitor market conditions, particularly those affecting the IT sector. Long-term prospects for TCS remain strong, but short-term pressures will likely keep the stock volatile in the coming months.

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