Tata Consultancy Services, India’s largest IT company (Tata Consultancy Services), will kick-off the earnings season for December with its results in January.
The IT giant’s revenue is likely to be muted in Q3 due to the higher number of furloughs. However, a decline in the Indian Rupee should help to boost margins.
The company’s shares were mostly unchanged on Wednesday, ahead of Thursday’s results.
TCS shares have suffered in recent weeks. They are down around 9% over the last thirty days.
TCS results for Q3: Earnings estimates
Analysts expect an average revenue increase of 6.7% on a year-over-year basis, to Rs 64,645 crore. The profit for the quarter ending December is expected to be Rs12,405 billion.
According to estimates, TCS is expected to report a YoY increase of 11.5%, or Rs 15,830 crore.
| Estimates | Earnings | EBIT | You can also Profit |
| Systematix | 65,384.6 | 16,077.8 | 12,469.9 |
| Centrum | 64,251 | 15,613 | 12,039 |
| IDBI Capital | 64,087 | 15,637 | 12,368.9 |
| KR Choksey | 64,708.8 | 16,060 | 12,486 |
| HDFC Sec | 64,369 | 15,587 | 12,029 |
| Motilal | 64,500 | 15,800 | 12,700 |
| Nirmal Ban | 65,220 | 16,036.7 | 12,744.6 |
| The Average Person | 64,645.77 | 15,830.21 | 12,405 |
The numbers are in crores of rupees.
TCS Q3: What are the analysts expecting?
Centrum anticipates TCS will report 0.2% revenue growth QoQ in constant currency, and a cross-currency tailwind of approximately 100 basis points.
The EBIT is expected to grow by 23 basis point due to operational efficiency despite weaker revenue growth.
Analysts say that the most important aspects of the market to monitor are the comments on demand and the pipeline.
IDBI Capital expects revenue to decline by 1% QoQ in USD, due primarily to seasonality and furloughs.
They expect an EBIT margin improvement of 33 basis points from quarter to quarter, due in part to operational efficiency and wage increases starting Q1FY25.
Focus will be placed on the total contract value of winning deals, trends in hiring, offshoring, sustainability of EBIT margins, trends for Generative AI, as well as outlooks and trends within US and European banking markets.
Motilal-Oswal predicts a subdued 0.4% growth QoQ, in constant currency, as furloughs have a negative impact on revenue. However, client-specific issues are expected to be normalised.
Talent development, training and operational efficiency will likely improve the EBIT margin by 40 basis points.
Deal pipelines are expected to be healthy in BFSI and other sectors, with the manufacturing sector, UK/Europe, being particularly vulnerable.
Monitorables to watch include the near-term outlook for demand, pricing, BFSI and deals. Motilal oswal estimates TCS’s FY27E EPS at 30x, taking into account the potential downside risks from BSNL ramping down in FY26E.
Furloughs will result in a flat growth rate for TCS. KR Choksey expects 6.8% growth YoY. Brokerage noted that deal pipeline is strong and supported by big deal wins.
The EBIT margins will improve in the next few months, mainly due to higher utilization.
Systematix expects TCS will report flat growth in USD, due mainly to furloughs. This makes the third quarter a weak season.
The TCV will be resilient, and the challenges facing clients in Life Sciences and Healthcare should stabilise.
Analysts noted that India, Asia Pacific and continental Europe were the main contributors to the growth of the company in the third quarter, while growth was muted for the US, LATAM and US markets.
Systematix expects a QoQ increase of 50bps in EBIT margin due to investments in training and talent improvement. However, the ramp-up costs associated with the BSNL transaction could lead to additional expenses.
The post TCS Q3 Preview: What analysts expect to see from the IT giant’s earnings can be updated as new information unfolds.
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