Tata Consultancy Services (TCS) has reported strong earnings for the third fiscal quarter, but the rising cost of hiring and employee training in the United States appears to have taken a toll on its profit margins.
Operating margin decreased to 25.6%, down 90 basis points from the previous quarter, while revenue increased by 1.8% to US$5.2 billion. The company made US$1.15 billion in net profit despite 2.7% depreciation in the rupee (Indian currency) during the quarter.
Rapid expansion in the US and the rising cost of employee training are apparently eating into its profits. In the first two quarters of the current financial year, the company increased its global headcount by 16,104 people.
TCS has been adding more people to its US payroll ever since the White House began tightening H-1b visa program as part of President Donald Trump’s ‘buy American and hire American’ policy. The Indian company was declared the largest employer of American technology talent in 2016.
In a statement, company executives conceded that rupee volatility and the growing cost of doing business in ‘some foreign markets’ were hurting its profits.
TCS, the first Indian corporation to surpass US$100 billion in valuation, makes nearly half of its money from clients in the banking, financial services, and insurance (BFSI) sectors. Nowadays, it is seeing a stronger demand for new technologies, including cloud computing, analytics, and automation.
Considering its latest quarterly results, TCS’ digital revenue grew nearly 53% year-on-year, making up 30% of its overall revenue.
Meanwhile, Infosys, regarded as India’s IT bellwether, reported a steep 12.5% decline in net profit, despite the fact that its revenue increased more than what analysts had estimated. The Bangalore-based IT major is expanding rapidly in the US, with plans to hire 10,000 Americans by 2021.