(Bloomberg) -- Tata Consultancy Services Ltd.’s quarterly profit missed analysts’ estimates, a sign that clients from banks to retailers remain hesitant to commit to large investments on information technology.
Net income rose 5% to 119.1 billion rupees ($1.4 billion) for the three months through September. Analysts, on average, projected 125.47 billion rupees. Sales rose 7.7% to 642.6 billion rupees.
TCS leads a $250 billion Indian industry that helps major corporate clients around the world adopt automation, cloud computing and artificial intelligence. A slowing global economy and military conflicts have spurred caution around big ticket software or services investments, though a bigger-than-anticipated US rate cut last month could reassure enterprises to some extent.
What Bloomberg Intelligence Says
Though weak economic conditions might hurt growth over the next 12 months, TCS will likely benefit in the long term as companies spend more on digital initiatives and increase their offshore IT footprints. TCS can expand sales by the high-single to low-double digits in normal economic times.
- Anurag Rana & Andrew Girard, analysts
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TCS and homegrown rivals such as Infosys Ltd. emerged as outsourcing giants a few decades ago by offering cheap back-office solutions to the world’s biggest corporations, giving rise to the term “Bangalored.” And as their clients grew, they became important partners to companies seeking to transform their business. TCS’s smaller rival reports quarterly results later this month.
The company is one of the crown jewels of the cars-to-steel Tata conglomerate, which is trying to position itself as an Indian leader in technology beyond software and services. This week, the Tata group announced the death at 86 of longtime chairman Ratan Tata, who helped build the 156-year-old business into a global operation with $165 billion in revenue.
Among TCS’s partners is OpenAI-backer Microsoft Corp.. The outsourcer is counting on that relationship to develop AI-based services for clients — key to the longer-term growth of the outsourcing industry.
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