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Tata Consultancy Services Ltd (TCS) trailed already low growth estimates for the September quarter. Compared to the Street estimate of 2-2.5% sequential expansion in revenues in constant currency terms, the company delivered a growth of 1.7% last quarter.
On the positive side, operating margin expanded 1.7 percentage points sequentially, exceeding analysts’ estimates. But a significant part of the gain in the operating margin is driven by cross-currency benefits. Volume growth came in at 3.2%, which was also decent; although ultimately what matters is revenue growth, especially given the challenges on that front in recent years. Further, a revenue growth of 1.7% on 3.2% volume growth indicates greater-than-expected pricing decline.
Business in continental Europe is gaining traction, reflective in higher than company average growth of 5.3% last quarter; but the mainstay US market was below the company average.