Despite positive quarterly results, Tata Consultancy Services (TCS) is lagging behind analyst expectations. Last quarter’s profits were affected by a labour shortage.
The fourth fiscal quarter of TCS ended on April 1. Today, the organisation announced a net profit increase of 7.4 percent, totalling 1.2 billion euros. Disappointing, finds Bloomberg Intelligence. Analysts expected a profit of roughly 1.22 billion euros.
TCS expands
TCS’ growth is related to the pandemic. COVID-19 forced businesses into hybrid work worldwide. Organizations knocked on the doors of digital transformation service providers, including TCS.
The consulting giant has headquarters in Mumbai and more than 500,000 employees worldwide. A recent study by Brand Finance estimated its market value at nearly 15 billion euros. “A result of strong customer relationships”, said the organization.
Despite everything, not all is well in Mumbai. Recent quarterly figures point to a challenge. Profits rose, but the growth is not in proportion to the demand for TCS’ supply.
Labour shortage
Although the pandemic is subsiding in some parts of the world, transformations remain in demand. Analysts had high hopes for TCS, but a labour shortage affected results. TCS has insufficient professionals to optimally keep up with the demand for ICT.
A lack of talent makes finding and retaining employees more difficult, causing staff costs to rise and margins to squeeze. TCS’ quarterly revenue rose by 16 percent while its profit lagged behind at 7.4 percent.
Bloomberg Intelligence expects a sales growth of 10 percent in the coming period. Nevertheless, analyst Anurag Rana predicts that the next quarter may disappoint once more. “We expect employee attrition to remain elevated, which could make it harder to realize any margin expansion”, shares Rana. “As a result, it may become more difficult to boost profit figures.”
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