Tata Consultancy Services (TCS) is projected to achieve single-digit growth in revenue and profit during the April-June quarter of fiscal year 2024-25 (Q1FY25) compared to the same period last year. This growth is attributed to a recovery in the flow of business and clients’ willingness to resume discretionary spending. However, TCS may face margin pressure due to wage hikes.
- Also read: Ahead of IT results season, GenAI revenues a key metric to determine growth of companies
The company is set to release its Q1 results on Thursday. According to brokerage estimates, TCS is expected to report a net profit ranging from ₹11,771 crore to ₹12,140 crore for the June quarter, representing a 6-9 per cent year-on-year (Y-o-Y) increase compared to Q1FY24’s net profit of ₹11,074 crore. Sequentially, there could be a slight dip of 3-5 per cent.
Revenue is anticipated to grow by 4-5 per cent Y-o-Y, with estimates ranging between ₹62,086 crore and ₹62,491 crore.
Nuvuma Securities predicts that TCS will achieve 14 per cent quarter-on-quarter (Q-o-Q) CC revenue growth and 1.1 per cent Q-o-Q US Dollar growth, driven by recovery in the BFSI sector and continued strength in manufacturing. However, they also expect margins to decline by 140 basis points (bp) Q-o-Q due to wage increases.
- Also read: TCS partners with XEROX for IT transformation
Kotak Institutional Equities attributes TCS’s revenue growth to strong order signings from previous quarters, including $150 million from the BSNL deal. This would lead to marginal growth compared to the March 2024 quarter.
ICICI Securities estimates a 1.8 per cent Q-o-Q CC revenue growth for TCS, driven by traction in BFSI, retail (consumer business group), and hi-tech segments from deals announced in Q1. They also anticipate a 186 bp Q-o-Q decline in EBIT margin due to higher employee costs. The brokerage eagerly awaits management commentary on enterprise discretionary spending, deal announcements, campus hiring, large deals, and the BFSI sector’s turnaround.