India’s biggest information technology (IT) company, Tata Consultancy Services (TCS), is set to kick off the December quarter earnings season with its results on January 9.
While revenue for the IT giant is widely anticipated to remain muted due to higher furloughs in Q3, a depreciation of the Indian rupee is expected to support margins.
Shares of the company were trading mostly flat on Wednesday ahead of the results scheduled to be released on Thursday.
However, shares of TCS have been under pressure for the past few weeks, going down around 9% in the last 30 days.
TCS Q3 results: earning estimates
On average, analysts expect the IT giant to post a revenue jump of around 6.7% year-on-year to ₹64,645 crore. Profit for the December quarter is seen at ₹12,405 crore.
As per the estimates, TCS should report an 11.5% YoY to ₹15,830 crore.
| Estimates | Revenue | EBIT | 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 Bang | 65,220 | 16,036.7 | 12,744.6 |
| Average | 64,645.77 | 15,830.21 | 12,405 |
TCS Q3 results: what are analysts expecting
Centrum expects TCS to report a 0.2% QoQ revenue growth in constant currency terms, with a cross-currency headwind of about 100 basis points.
The EBIT margin is projected to increase by 23 basis points, driven by operational efficiencies despite the weak revenue growth.
As per the analysts, the key aspects to watch will be commentary on the demand environment and the deal pipeline.
IDBI Capital forecasts a 1% QoQ decline in revenue in USD terms, primarily due to seasonality effects like furloughs.
However, they expect a 33 basis points QoQ improvement in EBIT margin, aided by operational efficiencies and the impact of wage hikes from Q1FY25.
The focus will be on total contract value (TCV) of deal wins, deal pipeline conversion trends, hiring and offshoring trends, EBIT margin sustainability, Generative AI trends, and outlook in the banking, US, and European markets.
Motilal Oswal also predicts subdued growth of 0.4% QoQ in constant currency terms, with revenue impacted by furloughs, although client-specific challenges are expected to normalise.
EBIT margin is likely to improve by 40 basis points, driven by talent development, training, and operational efficiency.
The deal pipeline is expected to remain healthy, particularly in BFSI, but weakness in the UK/Europe and manufacturing sectors should be monitored.
Key monitorables include near-term demand and pricing outlook, BFSI, and deal wins. Motilal Oswal values TCS at 30x FY27E EPS, noting potential downside risk from the BSNL deal ramp-down in FY26E.
KR Choksey anticipates 6.8% YoY revenue growth for TCS, but with flat sequential growth due to furloughs. The brokerage noted that the deal pipeline remains strong, supported by large deal wins.
EBIT margins are expected to improve sequentially, driven by higher utilization.
Systematix also expects TCS to report flat revenue growth in USD terms, mainly due to furloughs, making the 3Q seasonally weak.
However, a resilient TCV is anticipated, and client-specific challenges in the Life Sciences and Healthcare verticals should stabilize.
The analysts highlighted that the company’s growth in the last quarter was supported by India, Asia Pacific, MEA, continental Europe, and the UK, while the US and LATAM markets saw muted growth.
Systematix estimates a 50bps QoQ expansion in EBIT margin, driven by investments in talent development, training, and productivity improvements, although headwinds from the BSNL deal ramp-up could result in additional costs.
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