Sigh. Sometimes it takes the mention of Nvidia to turn your attention to an Indian — indeed a global — IT services giant.
Tata Consultancy Services, the world’s largest IT services company by market value, saw its AI deal pipeline grow 66% to $1.5 billion in the most recent quarter.
And though AI has been one of the main growth engines for TCS, its shares haven’t seen anything quite like the Nvidia frenzy.
The company will report quarterly results later on Thursday, and you can bet that all eyes will be on its AI and cloud businesses. It will also serve as a good barometer for the US economy — TCS makes the bulk of its cash in North America. (Recession vibes or not?)
Track record
- Analysts expect TCS revenue to rise 7.7% and profits to climb 8% to 10% in the second quarter.
- The other number to watch is contract value, which shrank 18% last quarter. There was a 1.1% decline in business growth in its biggest market, North America.
AI aye?
While TCS is milking the AI wave with a $1.5 billion pipeline of contracts, this hasn’t really translated into its share price moving upwards. The stock is in fact lagging India’s Nifty 50 benchmark and comparable global tech stocks, as investors are probably worried about a slowdown in the US.
But if you believe that tech services will eventually play a big role in AI’s adoption and spread, TCS could be one of the best options to bet on. It’s got the quality, having grown profits consistently for the past 10 years.
TCS is also cash-rich and has weathered multiple storms, including the big one — the global financial crisis of 2008.
The last quarter did throw up some challenges, but the Fed’s recent rate cut could play in its favor. It could push private companies in the US to spend on long-term growth, sending some of that new capital to tech services firms like TCS.
