Tata Consultancy Services Ltd

NSE:TCS

Earnings Call Transcript

[Kritika Saxena, executive]

Hello, and welcome. You are with the Earnings Press Conference for Tata Consultancy Services. We're here to talk about our fourth quarter FY '25 results. Without further ado, I'm going to introduce the management. We have with K. Krithivasan, MD and CEO; our CFO, Samir Seksaria and our CHRO, Milind Lakkad. .

We are live on all social media platforms, and we have our friends from the media over here. So we're going to start with a CEO address, and then followed by questions. Kriti, the floor is yours.

[K. Krithivasan, executive]

Thank you, Kritika. Good evening, everyone. So we closed the financial year with our revenue exceeding $30 billion. In Q4, our revenue grew by 2.5% year-on-year and we grew by 0.8% on a sequential basis. Our rupee revenue grew by 5.3% year-on-year to reach INR 64,479 crores. Our operating margin for Q4 stands at 24.2%, representing a contraction of 30 bps over Q3. This translates to [ INR 15,601 crores ] of operating profit. Our net margin for the quarter has come in at 19%, translating to INR 12,224 crores. Our EPS reached INR 33.79 per share. Cash from operations at INR 15,294 crores, representing a strong conversion of 125.1% of net profit.

We had spoken about the improving market sentiment and early sense of discretionary spend revival in January. But as you know, this was not sustained due to many of the discussions around tariff. We are absorbing delays in decision-making and projects starting with respect to discretionary investments. Despite this, all our major geographies exhibited growth on a sequential basis.

On a sequential basis, North America and U.K. grew by 0.2% and Europe grew by 1.2%. New growth markets of Asia Pacific and Middle East and Africa also grew positively this quarter. After many consecutive quarters of strong growth, India experienced a degrowth of 13.2% in this quarter. Among the verticals on a sequential basis, BFSI grew by 1.3%, and Energy Resources and Utilities grew by 1.1%. Our Communications and Media and Tech Services business also experienced marginal growth. However, our consumer business degrew by 0.7% and Life Sciences and Healthcare degrew by 0.8%. Manufacturing degrew marginally by 0.1%. TCS banks and products and platform continued their growth momentum.

Our customer metrics continue to remain resilient. The number of customers from whom we make more than [ 100 million ] rose by [ 2 to 64 ] customers on a year-on-year basis. In addition, our customer base of 1 million stands at 1,332 , an increase of 38 last year.

We had a very strong order book closure again this quarter. Our order book closure for the quarter stands at $12.2 billion. This is the second highest quarterly order book and does not include any mega deals. Our order book for North America stood at $6.8 billion, for BFSI at $4 billion and Consumer business at $1.7 billion. Most geographies and business groups had strong order book closures.

By the end of Q4, our net employee count stood at 607,979, a net increase of 625 associates. Our IT services attrition stood at 13.3%.

We are seeing significant traction for GenAI and Agentic AI services and solutions across industries and markets over 580 AI for business engagements were delivered or in flight during this quarter. We are investing in Agentic AI form with 150 solutions across financial and accounting, supply chain, sourcing and procurement, HR and customer experience to enable customers in the journey towards autonomous GBS.

We also enhanced our Wisdom next 2.0 platform to offer Agentic AI capabilities. The new features will enable faster onboarding, centralized governance, in and security [indiscernible] spectrum of pluggable solutions to accelerate innovation. For a global financial services measure, we are using a combination of GenAI and TCS MasterCraft to migrate over 50 million lines of [indiscernible].

In Q4, we applied for 267 patents and were granted 235 patents.

Coming to full year commentary of revenue for FY '25 stands at [indiscernible] crores, representing a rupee growth of 6% and USD growth of 3.8%. On a constant currency basis, we grew by 4.2% in FY '24, compared to 3.4% in FY '23. Our operating for the year is INR 62,165 crores at a full year operating margin of 24.3%. Our net profit for FY '25 is at INR 48,533 crores at a net margin of 19% and a full year EPS of INR 134.19. Cash from operations stands at INR 51,426 crores, which is 105.9% of the net profit.

For full year, U.K. grew by 4%. Europe was flattish at 0.7% and North America de-grew by 1.8%. India grew by 62.6%, LATAM by 6%, APAC by 6.8% and EMEA grew by 11.2%. Among the verticals, banking grew by 0.7%, consumer business by 0.3%, manufacturing by [indiscernible]. Energy Resources and Utilities grew by 5.1%.

In FY '25, Licenses degrew by 1.6%, Technology Services by 1.3% and Comps by 9.5%. The Board has proposed a final dividend of INR 30, bringing the total dividend for the year to INR 126 per share. As all of you don't notice, we also announced the appointment of Ms. [indiscernible] as the President and Chief Operating Officer; and Mr. Mange Sate as the Chief Strategy Officer. Both are well-known industry veterans and bring immense expertise on helping businesses adopt new technology and consulting. We welcome Aarti and Mangesh into the TCS family.

With that, I hand it back to Kritika and we'll open it up for questions. Back to you, Kritika.

[Kritika Saxena, executive]

Thank you, Kriti. We'll start, as always, Reema Tendulkar from CNBC TV18.

[Reema Tendulkar, analyst]

Gentlemen, good evening. So Kriti first question is for Q4 and FY '25, if you could just tell us what was the growth ex of BSNL? Could you put that into numbers. FY '26, how will it compare versus FY '25. And also, given the macro uncertainty, are we seeing deal cancellations, ramp downs or pauses? If yes, what's the extent of it and in which sectors? .

Samir, if you could explain the margin performance, 24.2% versus 26% on a year-on-year basis. That's a sharp decline. And next year, do you think margins -- you can do better given the low-margin deal BSNL ramps down. And Milind, on wage hikes and hiring?

[Milind Lakkad, executive]

Reema, like, as were mentioned, like overall, while we had a degrowth of 0.8% on a sequential basis, all the major markets grew. Most of the industry verticals grew. Our international business had a positive growth. I will not be able to call out what is the extent of BSNL degrowth here.

What would be international business growth?

[Samir Seksaria, executive]

International will be approximately -- sequentially right, 0.6%.

[Milind Lakkad, executive]

0.6%. Okay. On last quarter also, I mentioned that we said [indiscernible] we expect this to be better than [indiscernible] we still believe, based on the order book that we have announced and kind of deals we have signed, while there could be some short-term uncertainties. FY '26 would be a better year than FY '25, okay.

On the business, overall business environment, while until February, we were quite positive, and we were seeing very optimistic about the quarter. we started seeing some amount of some uncertainty creeping in, in March and resulting in some project delays, some decision-making delays. We have not seen any major project cancellations. There are some ramp downs here and there. But there are some delays in decision-making and that's what we observed this time. And as I said, we believe that maybe over the course of next few months, these uncertainties will schedule in, and we should be back to business.

[Samir Seksaria, executive]

Reema, from a Q4 to Q4 margin perspective, I think TCS was the only company who probably gave a full cycle of increments and also did method-based interventions regularly through the period, that as well as combined with investments in capability building in our infrastructure expansion further is the overall impact which we are seeing. .

Sequential basis, the margin impact was 30 basis points, also on merit interventions or technical interventions, which are done through this quarter sequentially. You asked about FY '26, absolutely. So first, our overall guidance range or the guidance which we call it, still remains at 26% to 28%. There is a gap. And given the current environment, there might be some impact on the operating leverage, maybe because of utilization taking an impact. But overall, the operational levers, which we have been talking about, whether it is in terms of pyramid utilization and productivity still remain, and we believe that should enable us to get true also uncertainty provides an opportunity and we'll use this opportunity from a cost optimization perspective as well.

[Reema Tendulkar, analyst]

[indiscernible] or margins?

[Samir Seksaria, executive]

Sequentially, the tactical interventions were about 100 basis points.

[Reema Tendulkar, analyst]

And what was it?

[Samir Seksaria, executive]

They were mainly linked to promotions -- merit-based promotions.

[Milind Lakkad, executive]

Reema, hiring, we have onboarded 42,000 trainees in FY '25 and '26 number will be similar or a little higher. Regarding wage hikes, considering the uncertain business environment, will decide during the year when to make that happen.

[Kritika Saxena, executive]

Next question from Sajeet Manghat, NDTV Profit.

[Sajeet Manghat]

Give us a sense of the discretionary spend environment because when we spoke in January, you spoke about being optimistic about that. As we said in April and the kind of global turmoil, which is happening with respect to trade, -- and as a result of it, the derivative impact, which is happening on IT and IT services, how do you see discretionary spend moving from here on? .

Samir, on the BSNL front, now that it's getting ramped down, what could have been the impact -- margin impact on your balance sheet of FY '25 because of BSNL? I'm talking about has BSNL not been there, the margin could have been higher by how many bps? Or -- and because of BSNL it came down by how much? And Samir, on a year-to-year basis, the numbers are almost the same, 6.0 or 6.07 lakh employees on a head count basis. Is that the level that we'll be maintaining despite the fact that you're mentioning that you'll take 40,000 or 40,000-plus employees in FY '26?

[K. Krithivasan, executive]

Sajeet, given the fact that this uncertainty people started experiencing towards late February, March, if you look at the -- our order book, -- the discretionary spend versus nondiscretionary compares quite well with Q3. But what we are seeing from the market, I would expect there would be delays in decision-making on discretionary spend if this uncertainty continues. But of course, say, with yesterday's announcement, we need to see does it bring in more optimism into the market and make the decision-making cycle faster or at least normal.

[Sajeet Manghat]

[indiscernible]?

[K. Krithivasan, executive]

See, usually in these kind of situations, many of the customers also try to do more cost optimization programs. So that definitely provides an opportunity like even in Q4, there's been a good mix of programs around operating model transformation, vendor consolidation, technology transformation. I do expect that it will provide us an opportunity for gaining further market share.

[Samir Seksaria, executive]

So typically, we don't call out customer-specific excluding margins or what are our margins on a specific customer.

[Sajeet Manghat]

[indiscernible] that you expect?

[Samir Seksaria, executive]

As we have been calling out. So if you do the maths on the third-party expenses, which we have in the cost of equipment and software, be able to calculate it. And like we have been calling out the impact in the prior quarters. Yes, you would expect as or specific large transformational project ramps down, that should be unwinding of that impact.

[Milind Lakkad, executive]

Sajeet, hiring from the campus is strategic for us. We will continue to hire I said this earlier, and I'll say it again, that our numbers would be similar to what I did earlier or better. With respect to net addition, it really depends on the overall business environment and what we eventually hire from the market, depending on the skill requirements in every quarter.

[Sajeet Manghat]

[indiscernible].

[Milind Lakkad, executive]

It is not a worry. It is not very worry purely for one reason that our quarterly annualized attrition has come down by almost 130 basis points this quarter.

[Kritika Saxena, executive]

Next question from Shivani Shinde, Business Standard.

[Shivani Shinde]

Kriti, first question to you. You obviously sounded off the U.S. tariff cautiousness in your -- are there certain verticals that we should see, which will have -- which will bear the brunt of these tariffs? Are you already seeing that when you say there have been delays or clients are getting -- pausing the discussions? And if that so, which are these verticals that you're seeing?

Two question where Milind can also join in. Two significant announcements in management. The last time TCS had a COO was [indiscernible] was appointed and then of course, I'm going back. I know I'm sorry, but COO is a significantly important position. So I just wanted to understand for the Mr. [indiscernible] appointment to that role. Samir, 2 questions. CapEx for next year. Do you see any impact because of tariffs do you see in terms of your expansion plans that TCS has. Milind, you are saying you will take a call on wage hikes. Is that -- I mean, should we think that because of this uncertainty, there may be certain delays?

[K. Krithivasan, executive]

Shivani, first from the vertical perspective. As to be expected, like as the uncertainty [indiscernible] industry that you also saw the U.S. consumer confidence index going down. So the impacted businesses tend to be in the consumer retail sector. Retail has been impacted to some extent. And when you say retail, retail, CPG and also travel hospitality. That's probably the most impact, et cetera. And other sector that's been impacted is auto, like because of the tariffs that have been imposed on the auto sector. So I see the maximum impact in these 2 sectors.

Other than auto manufacturing seems to be still okay. We are -- banking financial services seem to be okay. Insurance, there is some softness, [indiscernible] continues to -- the demand environment continues to be good, which is giving us also the hope and confidence for the future.

Comps is something that we need to watch out for. Coming to COO announcement. So first [indiscernible] was also the COO. He left only 1 year ago, okay? See, what we -- we actually were part of doing our strategy exercise on what are the areas of focus. When we did that, we realize that as there is a significant technology transformation happening, there are a lot of areas where we need continued focus to build talent, build partnership and hire more, gain or strengthen the talent pool available because some of the talent pool, we cannot depend only on homegrown talent in these new technologies. So we thought that there is a lot of focused activity required to drive growth and sustain the leadership in these new technologies and [indiscernible] by that extension driver strategy.

So then we were looking at what are the leadership options and bandwidth available. We realize that it's important that we add to the bandwidth of leadership that's already available with us. [indiscernible], I know there how many of you know, Aarti was with TCS before. She knows TCS [indiscernible], she has been part of the TCS Board. Also at the same time, being as a Chief Digital Officer of Tata Group, she has extensive experience in how the business has done and how business adopt technology. So we thought it would be most appropriate for us to have someone like her as a COO and the Tata Group has been kind enough to let us have her with us. So that's about it.

[Milind Lakkad, executive]

Shivani, yes, I think because of the uncertain environment, we will decide on the wages during the year, it can be any time, but it will really depend on the environment.

[Samir Seksaria, executive]

Question on CapEx, if you look at this year, our CapEx was significantly higher than the previous year. We did approximately INR 5,000 crores in CapEx compared to about INR 2,700 crore in the previous year. In terms of investments continuing into the next year, we don't plan to scale it down investments in talent and innovation, infrastructure or partnerships. Currently, there are no plans to scale any of them down.

[Kritika Saxena, executive]

Next question from Ankur Mishra, ETNow.

[Ankur Mishra]

To understand from you your presence in North America, which you talk about on a year-on-year basis from about 50%, it has come down to 48% or so. I want to understand what is your strategy further. Do you continue -- do you plan to continue to maintain this kind of geographical presence, meaning the focus on North America. Is there a rethink on that? And how has been the quarter particularly in terms of performance from that region.

You have mentioned, Samir, about 26% to 28% margins, but is there any time line you see when you are going to achieve that? And what gives you confidence for that?

Milind, I want to understand from you the attrition rate, are you comfortable with that? Or you see some -- you see it as a challenging thing?

[K. Krithivasan, executive]

So Ankur, from a North America perspective, it will be a main geography, almost like a home market for us or foreseeable future because there are large enterprises that invest in technology a lot, and we find there's greater opportunity for us to participate in those technology transformation.

In the fourth quarter, like we did grow marginally, but 2% on a Q-on-Q basis. As I said, all major markets grew for us. What you see going down to 48%, is to some extent, like India geography also are having significant growth. So to some -- because of that, you find some market share move from North America to the rest of the world. So that's the shrinkage, but I don't think -- otherwise, our focus on North America will continue.

[Samir Seksaria, executive]

And given the overall certainty, which currently prevails and the dynamic nature in which things are changing, it's difficult to give a time line in terms of when -- we have executed it in the past. So we are well confident in terms of how we can achieve it. What gives us confidence in terms of are the levers which you talked about, the operational levers whether it is in terms of productivity or realization going for a bit pyramid mix or the improvement in revenue mix also can help.

[Milind Lakkad, executive]

Ankur, attrition has inched up a bit from 13% to 13.3% in this quarter. But we are okay because our quarterly annualized attrition has come down this quarter by 130 basis points. So we should be okay.

[Kritika Saxena, executive]

Debangana Ghosh, MoneyControl.

[Debangana Ghosh]

Kriti, my question to you, I wanted to understand how is the impact of AI playing out in the discretionary spending part? Because in the industry, we have started hearing that companies are trying to provide productivity gains to the customers. So -- and also the deal tenure and deal sizes are coming down. So I wanted to get a bit of understanding on how it is playing out for TCS. Samir, on the basis of that will passing on productivity gains from AI impact the margins in the short term.

And Milind wanted to understand, there were some reports on the TCS considering wage hikes in single digits of 4% to 8% or so. So if you could comment on that?

[K. Krithivasan, executive]

AI plays out in 2 ways, right? There are projects which we call for business. These are all transformation projects. In fact, for one of our large clients recently, we did a project where they are in the moviemaking business. We are able to use AI to read the script, find out which are those scenes where are dangers where you need special license to take, which are the scripts where the property branding could be enhanced. So there are a lot of opportunities in AI, which previously we would have done in a manual way. and maybe we've taken more time and may not have been accurate. So it creates 2 sets of projects, a, for business, as we call it, and then AI for IT, which are primarily software engineering projects.

So the deflation in productivity is worried what -- because it's for business is mostly a net new opportunity. This is AI for IT, where there's a productivity gain comes in. So we try to be the whatever projects we do, whether it's a maintenance program or it's a new development. We try to infuse AI as much as possible, and if there are any productivity gains, it depends because each of the kind of productivity gain you get will vary based on the technology and based on the platform in which you are using it.

So we do share those benefits with our customers, and there are no -- if they -- if it becomes -- if you have to give a productivity gain, we will give the gaining customers as well. But overall, if I net-net, because there is a significant amount of [ SADA ] for business projects also coming in, we believe net-net, there won't be a overall reduction in the volume of work that's being done.

[Samir Seksaria, executive]

Your question in the short term, would that be a margin impact? There won't be because one, the investments which are being done are already carrying on. Second, in terms of directly linked to the productivity question, it is about sharing gains which are realized. So that also, there won't be any.

[Debangana Ghosh]

Are these guidelines [indiscernible] .

[Milind Lakkad, executive]

No, we did not at least absorb this in a significant way. this quarter of the deal duration coming down.

[Unknown Executive]

Debangana, I think I responded to [indiscernible] already with respect to the fact that due to uncertain environment, we will decide during the year when that's going to happen. And the quantum of it also will decide at that time only.

[Kritika Saxena, executive]

Ekta Suri from Zee Business. .

[Ekta Suri]

Kriti, [Foreign Language] so how TCS planning to be a little different, adding more value to the business. Samir, [Foreign Language]?

[Milind Lakkad, executive]

So Ekta, on a deal -- long-term commitment from our customers, -- if I -- one way to look at is, what is the length of duration of the deals, as you mentioned, the deal duration hasn't changed. And as we mentioned, the TCV that we signed this quarter even without any mega deals, it's probably the second highest for us, right? It's a [ $12.2 billion. ]The previous had a significant portion of mega deals in it. So we are not seeing any reduction or reduced commitment from our customer. In fact, the engagements are only stronger.

And in fact, it relates to your second question because we -- how do we bring value to our customers through AI, so that is actually what is increasing the commitment and engagement with our customers, what we -- each 1 of our business groups, looking at the value chain of their customers' industry segment. Looking at what are the opportunities where AI can bring them immediate value or where you can, in fact, disrupt the value chain, bring more sustained value. So that's what our teams go back to customer with -- that's where we differentiate ourselves. We were helping them leverage the technology investment they have made and getting the business benefit. And we are very confident that we'll be able to deliver more value to them through AI.

[Samir Seksaria, executive]

So your question on whether the slight drop in margin was due to current macro getting impacted. As I explained earlier, it is more linked to the investments which you made, the tactical intervention, which I talked about, and some part of it is on higher elevated expenses in this quarter, which was linked to either purpose-driven initiatives on CSR or higher travel or marketing events. So not directly linked to anything on how the macro is turning out in the past couple of weeks. .

Do we see cost escalation? I think I mentioned about one part in an environment where things are uncertain. Our operating leverage gets impacted a bit because you might have to carry higher bench or the utilization gets impacted.

[Milind Lakkad, executive]

[Foreign Language] additional people, we will need. [Foreign Language] too early to say, but [Foreign Language] we'll do more work. We'll deliver more work for our customers. We'll need more -- same or more number of people to deliver that work. So I don't see an impact on hiring because of AI.

[Kritika Saxena, executive]

Varun Sood from Mint.

[Varun Sood]

Sir, the first question, has the BSNL deal ended in the March quarter?

[Samir Seksaria, executive]

Ended. It's successfully going towards completion, not yet ended. It should end. The initial contract should end in Q1.

[Varun Sood]

Sir, the second question, you mentioned 94% of your international -- that is our international business grew 0.6% sequentially. So that means almost about 94% of your business, 6% India. So was the slowdown in BSN so much that your net sequential decline was almost 1%.Would that be a right way to look at the number?

[Samir Seksaria, executive]

Looking at it.

[Varun Sood]

Just to clarify...

[Samir Seksaria, executive]

We are not calling out client-specific ones, but if you do the calculations, that will come to approximately that time .

[Varun Sood]

Kriti, you mentioned that late February, early March was when this uncertainty started. But this quarter, again, it won't reflect truly on your performance because 1 month's uncertainty should not really impact your overall growth in Q4 and for the fiscal year. So I'm just trying to understand, is it just that the BSNL deal, the ramp-downs happened -- and full year revenue decline as almost a full year growth is almost the slowest in 4 years. Are there more such rundowns? Is there some client what should we say, the leaking bucket theory, where you're using some of your clients?

[K. Krithivasan, executive]

First of all, actually, you are not correct. If you look at FY '24, we grew actually better than FY '24 and '25.

[Varun Sood]

FY '24 was 4.1%.

[Samir Seksaria, executive]

FY '24 was [indiscernible], FY '25 is 4.2%. .

[Varun Sood]

FY '25 is 3.8%.

[Samir Seksaria, executive]

You are looking at dollar numbers probably [indiscernible] constant currency has significant cross currency valuation. We have published [indiscernible] numbers as well.

[K. Krithivasan, executive]

Otherwise like if [indiscernible] said, if you are not take without BSNL, that if you had that had added to our overall growth, probably we are -- with this pointed without BSNL being neutral. We'll be in the 6.7% kind of territory positive. There was, as I said, some amount of project deferral that happened in March that uncertainty. So we were hoping that we will be sub 1 person -- I'm sorry, higher than 1% when we were in the early part of the quarter, like it came down. So -- but what we were primarily looking at is are all business verticals growing and all major markets growing. And that was the most important thing for us, which we are quite accepting consumer business and Life Sciences and Health Care manufacturing marginally, but all other all markets grew, and we had growth coming in business verticals.

So on a whole, given the situation, we are quite comfortable to where we are. I don't think -- as I said, there are no significant ramp down elsewhere, and there are no significant cancellations elsewhere. So we are comfortable with where we are given the overall situation.

[Varun Sood]

[indiscernible] questions. Considering this uncertainty, macroeconomic uncertainty, 1 would believe there is every likelihood that this INR 39.4 billion order book, which you have, some of those projects may get deferred, may get delayed and some of your current accounts, those ramp-downs, which are happening, God forbid, but they could also become pretty big. So when you are saying that FY '26 will be better than FY '25, is this more a hope? Or do you have a visibility that FY '26 indeed will be better than FY '25?

[Unknown Executive]

Varun, the only visibility is the order book, okay, whether you want to call it a hope or aspiration it's for you to get -- I'm giving you the fact that I have [indiscernible] order book. Based on the order book, based on the discussions I've been having with our customers, we are saying that we believe FY '26 will be better than FY '25. If our assumptions go wrong, then you'll be right.

[Varun Sood]

I don't want to be right. One last question, sir. This [indiscernible] any visibility or any color which you can share that, say, 50% of this is within 5 years because this, I would like to believe, includes both your renewals and your new model -- can you share any number of, say, 30% or 40% of this order book will be translated to the revenue within 2 or 5 years because it gives much better understanding how your order book is translating to revenue.

[Unknown Executive]

Varun, we have not been sharing that information. But all I can assure you is the average deal tenure, weighted the average deal tenure has not shifted significantly compared to previous quarter.

[Kritika Saxena, executive]

[indiscernible] from PTI.

[Unknown Analyst]

So many times in this conference. Just wanted to broadly know how do you play this. And when you say that FY '26 would be better than FY '25, -- is it the result of the 90-day leather, which you have probably gotten or would that comment have been different had it been 48 hours before have we met, that's for one. And secondly, sir, has there been any change on the infra creation front as well? Infra creation front as well, last 3 months, we have seen 2 announcements towards this. CapEx is also up in FY '25. So are you building more rather than sort of leasing? Is that a preference at the company?

[Milind Lakkad, executive]

Ashish, all of you mentioned uncertainty as many times as I mentioned. So I don't -- the point is -- my belief, right? It -- no region will be -- we'll want to [indiscernible] this uncertainty for a very long period of time maybe for a period of -- that's what I believe. Near term, some certainty will say much, and we all know where this rare trade policy regime would take us forward. And once that -- there is some sort of clarity on that. Businesses take decisions, whether they are towards more cost optimization, more discretionary projects, those decisions will be taken. But most important thing is some decisions will be taken.

We also believe that most organizations have to go through technology transformation because they have deferred significant technology transformation for too long. Third is our order book. So based on this is what we can comment.

We believe that when I say FY '26 would be better, it's based on these factors. More importantly, like important assumption I'm making is this uncertainty will be short lived.

[Unknown Analyst]

[indiscernible] like ordering? You are reporting the second biggest number on the TCV. So why are they ordering at all in the sense that -- or is it so that [indiscernible], this number does not capture any activity in March?

[Unknown Executive]

It does like see, I said there's no major panic that sit in the market. Some places, there's a different -- but it's not that it's all come to a stop. Like we have been winning large deals across, in fact, our North America order book also is one of the highest, I think, right? -- is some of the highest. So customers are taking our decisions towards cost optimization. There are some decisions still taken towards a discretionary prospect? Like I did say there's uncertainty because there is a reduction. Maybe you can look at if -- without the uncertainty, our order book could have been even better. That's the way I would look at it.

[Samir Seksaria, executive]

See typically, in any city, which we operate in, we have a balance of lease and owned facility. And if you look at the 2 announcements which you talked about, one is currently a lease with an option to buy at a later date, and the land acquisition, which we talked about is a thing where we have bought the land and we'll be building up capacity over the next 3 years. There's no change in from [indiscernible] decisions. .

[Kritika Saxena, executive]

Your next question from Himanshi from the Economic Times.

[Himanshi Lohchab]

I want to ask about -- I know you've also already answered about it, but BFSI in the Americas, are you seeing deal momentum slowing down there? Could you elaborate a little bit? Also, Milind, sir, is there a visibility on the upcoming quarters, especially the next 90 days, there's a lot of uncertainty. Any visibility on head count growth in the upcoming quarter?

[Samir Seksaria, executive]

So BFSI in general, and particularly in North America, is still fine -- the growth has been good in Q4 as well. And globally also what we declined, so good growth compared to most other business verticals. And the deal momentum is also continuing to be robust and for us in BFSI North America.

Only segment where we find some softness could be insurance, but rest of it has been quite robust.

[Milind Lakkad, executive]

Himanshi as I said, we will -- we continue to hire from the campus and a similar or a little larger number than what we had last year. That will continue. What happens next quarter, what is the net head count increase depends on many other factors, which will be dependent on the business environment we are in right now.

[Kritika Saxena, executive]

Next question from Lalatendu Mishra from The Hindu. .

[Lalatendu Mishra]

My question is about the trade war, [indiscernible] trade war that is happening. The certainty that is more from yesterday, last night, is that 90 days of pause on 75 countries, and the trade war between America and China has intensified, the 2 biggest economies. As a company, how do you read it?

[K. Krithivasan, executive]

Lalatendu, my job is to read what my customers tell me. I don't want to -- I don't -- I'm not going to read anything macro picture and then like our approach has always been, stay close to our customers and understand what would be good for our customers in a given point in time. And so sometimes they do more cost optimization program. Sometimes they do more transformation. They want to leverage technology to provide benefit to them. So that's our approach has always been, like staying close to our customers, and developing our offerings to meet the requirements. So I'm not too worry, as I should say because it's not in my control. So I worry about what I can do.

[Milind Lakkad, executive]

So the stance remain the same, absolutely.

[Kritika Saxena, executive]

Next question from [indiscernible] from Financial Express.

[Unknown Analyst]

Two questions. Kriti, one is you've mentioned the megadeals order book is the second highest ever.

[K. Krithivasan, executive]

That book is very good without any mega deals in that.

[Unknown Analyst]

Yes. So Basically, if you can give some color on which deal segment you're seeing most traction? And if some color on how much GenAI adoption by clients is driving the order book. And second is where you're seeing the deal ramp down. You said it's not major, but then again, in what segment is happening and are GenAI-based deals also getting affected? .

[K. Krithivasan, executive]

See, first on the deal segment, like what we publish is North America, I gave you, North America is about [ 6.8 billion ], and BFSI is [ 4 ] and [indiscernible] retail business group is $1.7 billion, okay? And all of them are quite strong compared to the historical performance. And for the things that we don't publish also, most segments had a very strong deal.

And GenAI, as I explained, like we have, we look at both from AI for business and AI for IT, we find a strong traction and increasing traction in AI. There are no deal cancellations coming in AI. It is actually driving our growth. One of the key factors driving our growth and driving the order book.

[Unknown Analyst]

Okay. And Milind, one question for you. Last time also, we discussed the upscaling aspect. Now there's some margin pressure that you're seeing or anticipating given uncertainty. Do you see any -- that affecting the way you look at upskilling, especially with the new trainees on board?

[Milind Lakkad, executive]

Would we will never look at that -- look at it that way, is, like I said, campus hiring and overall internal development of our associates, whether the campus coming from the market or basically I have been here for a long time. That is a strategic investment to make irrespective of the market situation, and that continues.

[Kritika Saxena, executive]

Next question from [ Valerie ] from Hindu Business Line.

We'll actually move on now to Haripriya Suresh, who is joining us from Bangalore. She's joining us online. So Haripriya, you can unmute yourself and ask your question. Haripriya can you hear us? Or I believe Sai is joining from Reuters instead. We just got a message from Sai. Sai, if you can hear us, can you mute yourself and ask your question?

[Unknown Attendee]

Yes. So one question to Kriti and one question to Milind. So Kriti, you said that the uncertainty you expected to die down in the next few months, right? So can we assume that probably this -- whatever the client issues and all is short term and the long term, you expect from Q3 onwards, probably after the 90-day period you expect some sort of stability. So because it sends -- my second question is related to that because you're kind of sending mixed signals because you're saying FY '26 would be better than FY '25. So -- and there's also an added part of delayed wage hikes. So I'm sure like in terms of employee morality and probably in terms of attrition, that could have an effect.

So can you just tell us like -- when do you see certainty, at least like from your clients' perspective? And yes, and in terms of the attrition, do you see it climbing up because of the decision on wage hikes?

[K. Krithivasan, executive]

I said I expect or hope, okay, certainty [indiscernible] in probably [indiscernible] ? And I'm not [indiscernible] because this is not in my hand, right, like for me to comment on when there will be more certainty because it depends on so many global factors. And the decision that we have taken on wage hike is one where we know how our clarity. So we are not -- we don't want to put a time line on ourselves saying that when we would announce, but we said once we have clarity, we'll announce. Milind, you may want to add?

[Milind Lakkad, executive]

I think you kind of cleared that already. I think the only point I will add is we continue to communicate with our people, and continue to explain the overall situations and a lot of our people basically do understand this. And -- it has happened in the past in certain quarters, and we actually got a very good response in the past as well. So I don't expect any significant changes in attrition or anything on the workforce front because of this uncertain situation.

[Kritika Saxena, executive]

We are going to take a last question from Anjana from [indiscernible].

[Unknown Analyst]

One question is -- my first question is about concerns about visa policies in the U.S. since there are a lot of uncertainty in U.S. policies, what are your expectations? By any chance, are you -- do you have any strategy in place to deal with a possible shock if anything comes up, particularly about [indiscernible] visas.

Second is about -- we have been seeing a lot of traction in AI in Singapore, particularly AI boom in Singapore, -- so other -- your other industry peers in the U.S. like Google, Microsoft, NVIDIA have also been shifting their focus to Singapore as well. So are you also planning to focus more in Singapore while also continuing to focus on U.S. operations?

[Milind Lakkad, executive]

Anjana, with respect to the Visa issue, I think, as I said it earlier, we actually have a global model. We have workforce globally and obviously, including the U.S., a significant workforce where we hire locally, where we -- people obviously go on Visa from here. So while we do have -- Visa is issued this year as well. But our overall business environment is something which is the overall business model, which we have, where -- which is a global one, does not really depend on this specific factor on H1b visas.

[K. Krithivasan, executive]

AI, like we have a very significant presence in Singapore [indiscernible] we will work with multiple clients there. And regarding AI, we look at wherever talent is available because nowadays, this is a very niche and new area where we can acquire as much talent as possible. So we are focused on wherever we can add to a talent pool. We look at it like it could be Singapore, definitely is an option for us. But we look at multiple reasons where we can acquire AI talent.

[Kritika Saxena, executive]

All right. Thank you to everyone that's joining us on the live stream. Thanks to all the journalists that are here in person. We understand that it's a market holiday in India. So we really appreciate all of you taking out the time for us. Please join us for refreshments after this, and everyone watching online, thank you, and have a nice evening.