Optimistic Forecasts at TCS Despite Challenges in the US Market

India's leading software services provider Tata Consultancy Services (TCS) looks positively to the future: The company expects that its customers in the retail and manufacturing sectors in North America will increase their investments in technology. This assessment follows positive developments in the banking and financial services segment, explained CFO Samir Seksaria. A good sales season in the US, which should strengthen consumer confidence, as well as resolved labor issues in the manufacturing industry, contribute to the optimism. "If these three sectors, along with the banking sector, improve overall, we could see a good recovery," emphasized Seksaria. Nevertheless, his statements also reflect global economic uncertainties and persistent inflation, which force customers to plan technology expenditures cautiously. Despite positive results in the financial sector, TCS's revenues in North America, the company's largest market, fell for the fifth consecutive quarter. Retail and manufacturing are the main revenue drivers for the $29 billion company after banks. Recently, companies like Walmart, Amazon, and emerging e-commerce platforms such as Shein and Temu reported record sales on Black Friday and Cyber Monday. Online spending in the US increased by almost 9% during the holidays to $241.4 billion. Seksaria also sees an upswing for TCS's capital-intensive communications and media segment, should pressure from interest rates ease. The CFO's assessments underpin the CEO's expectation that the new US administration will reduce political uncertainty and strengthen customers' confidence in investments in discretionary projects. On Friday, TCS shares listed in Mumbai rose by 5.6%, marking the highest one-day increase since July 2024. Meanwhile, TCS downplays concerns about the rise of Global Capability Centers (GCCs), through which multinational companies could increasingly relocate work in-house. India's role as a location for GCC facilities is growing, with a market volume expected to reach $105 billion by 2030. Seksaria observes that GCCs are initially seen as cost-saving centers. However, in the long term, over a period of three to seven years, costs and productivity issues could lead to the cycle of opening and closing such centers continuing. In 2023, Infosys acquired the corporate unit of Danske Bank and previously TCS had taken over the department of Post Bank AG with 1,500 employees at the end of 2020.