TCS’ revenue down due to BSNL deal ramp-down; Tata Elxsi reports another quarterly revenue decline

Tata Consultancy Services’ (TCS) revenue miss (-3.3% QoQ CC) was attributed to BSNL ramp-down while the international market’s revenue decline of 0.5% QoQ CC was as per expectations. The operating margin expanded 30 bps QoQ despite the revenue decline due to the ramp-down of lower-margin BSNL deal. Amidst delays in decision-making and lower discretionary investments due to global uncertainties and clients seeking immediate ROI, TCS clocked TCV of USD 9.4b, primarily fueled by cost optimization projects rather than large transformation programs. The company remains optimistic that international revenue for FY26E will be better than FY25 and expects pent-up demand for technology transitions once market clarity emerges. Key positives include (1) strong TCV, driven by large deal wins across various markets and industries, (2) continued BFS spending, (3) better growth outlook, supported by increase in AI for business engagements, and (4) continued fresher addition.

Tata Elxsi’s revenue down by 3.9% Quarter-on-Quarter

Tata Elxsi (TELX) reported its second consecutive quarterly revenue decline, with Q1FY26 revenue down 3.9% QoQ in CC terms. This was primarily driven by a significant slowdown in the Media & Communication and Healthcare segments. Margin pressures persisted due to the revenue contraction; however, management expects EBITDA margins to rebound with growth.

TELX anticipates FY26 growth to be fueled by the Transportation and Media & Communication verticals. The Transportation segment, which contributes around 50% of total revenue, is showing signs of stabilization, particularly with its largest client, JLR. Continued strong demand for ADAS, SDV, infotainment systems, and electrification is expected to support growth beyond Q2FY26 in Transportation. Recent large deal wins (Mercedes-Benz, a European OEM, and Suzuki) have bolstered confidence in a revenue rebound in Q2FY26E. However, global macroeconomic uncertainties remain a key risk. EBIT margins are likely to stay under pressure due to two main factors: (1) lower utilization and (2) pricing challenges arising from vendor consolidation deals.

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Source: HDFC Securities Institutional Equities https://www.hdfcsec.com/hsl.docs/HSIE%20Results%20Daily%20-%2011%20Jul%2025%20-%20HSIE-202507110635380177090.pdf?t=11720256485391