Tata Consultancy Services (TCS), India’s leading software-services exporter, is optimistic about a recovery in its retail and manufacturing sectors in North America, following a strong rebound in its banking and financial services segment. The company’s CFO, Samir Seksaria, pointed to improved consumer sentiment, driven by strong holiday season sales in the U.S. and a resolution of some labor issues in the manufacturing sector, as key factors contributing to this optimism.
Seksaria’s comments reflect a cautious yet hopeful outlook, acknowledging the broader economic uncertainties and persistent inflation that have led clients to tighten their tech spending. Despite the challenges, TCS expects a recovery in its retail and manufacturing verticals, which are among its top revenue sources. Retail and manufacturing combined account for a significant portion of TCS’s $29 billion in annual revenue, with recent sales figures from major U.S. retailers like Walmart, Amazon, and e-commerce platforms such as Shein and Temu contributing to the positive outlook. U.S. online spending also saw a nearly 9% increase, reaching $241.4 billion during the recent holiday season.
However, the company continues to face a decline in its North American revenue for the fifth consecutive quarter, although the banking and financial services sectors have posted their strongest performance since mid-2023. TCS’s communications and media vertical, a high-investment segment currently underperforming, could also benefit from potential interest rate cuts, Seksaria suggested.
Echoing CEO Krithivasan’s sentiment, Seksaria noted that the incoming U.S. administration could remove policy uncertainties and boost client confidence, further encouraging investment in discretionary tech projects. As a result, TCS’s stock saw a 5.6% increase in a single day on Friday, marking its highest rise since July 2024.
TCS also addressed concerns about the increasing trend of insourcing by multinational corporations, which may reduce the outsourcing of IT services to companies like TCS. Many global companies are expanding their in-house teams and setting up global capability centers (GCCs) in India, which is projected to reach a $105 billion market size by 2030. While this could initially offer cost advantages, Seksaria pointed out that the cyclical nature of opening and closing GCCs may pose challenges for long-term sustainability.
TCS has also managed to adapt to this shift, acquiring units such as the captive arm of Danske Bank in 2023 and Post Bank AG’s unit in 2020, indicating a flexible approach to industry changes.
