The Q2 FY25 earnings season is set to be kicked off on Thursday even as India’s largest IT services company Tata Consultancy Services (TCS) is set to declare its financial results. According to analysts, TCS’s Q2 earnings are expected to be in low single digit. However, the BSNL deal could provide support to the company’s financial numbers.
In the previous quarter (Q1 FY25), TCS reported a 9 per cent rise in its net profit to Rs 12,040 crore from Rs 11,074 crore in the year-ago period. Its revenue from operations increased 5 per cent to Rs 62,613 crore for the June 2024 quarter as against Rs 59,381 crore in the same quarter a year ago.
TCS Q2 Results Preview: What Analysts Say
Brokerage firm Kotak Institutional Equities expects a 30 basis points quarter-over-quarter (QoQ) increase in EBIT margin, primarily driven by rupee depreciation. However, headwinds for the quarter include (1) lower utilisation rates and (2) a shift in revenue mix toward the lower-margin BSNL contract. It is noteworthy that margins in Q1 included a 35 basis points one-time impact from an electoral trust contribution.
Another brokerage firm HSBC in its note said TCS is likely to report a 1.5 per cent cc q-o-q revenue growth, with stable margins. The Tata group company is expected to see Q-o-Q weakness in Q2 due to slowdown in the UK business.
Brokerage firm Nuvama also expects TCS to post a 1.3 per cent QoQ constant currency (cc) revenue growth and 1.9 per cent QoQ dollar growth, driven by emerging markets and weakness in the US and UK.
Motilal Oswal forecasts a 1 per cent sequential cc revenue growth for TCS, driven by deal scale-up, including the BSNL deal, along with an incremental pickup in the North American BFSI sector.
Tata Consultancy Services (TCS) and Bharat Sanchar Nigam Limited (BSNL) are collaborating on a Rs 15,000-crore deal to establish a 4G network across India
TCS Q2 Results on Thursday: Key Things to Watch
Apart from profit and revenue growth, management commentary on the business outlook will be a key monitorable, especially after a 50 basis points (bps) rate cut by the US Federal Reserve.
Importantly, the Indian IT industry heavily depends upon the US economy as America is its biggest market.
This apart, hiring and attrition will also be a key watch out.
Shares of TCS on Wednesday rose Rs 1 or 0.02 per cent to close at Rs 4,252.3 apiece on the BSE.
