TCS Q2 results: 5 things to watch today
TCS Q2 earnings: HDFC Securities believes that in the absence of mega deals, the deal trends for TCS for Q2 and Q3 are critical to plug the BSNL impact in FY26.
- Oct 10, 2024,
- Updated Oct 10, 2024 4:04 PM IST
Tata Consultancy Services Ltd (TCS) is anticipated to report a 6-11 per cent year-on-year (YoY) growth in net profit for the September quarter on a 7-8 per cent rise in sales. Margin is likely to stay flattish on a sequential basis. All eyes will be on the deal pipeline, pricing scenario, outlook on growth and margins, and interim dividend, if any. Here are 5 key things to watch:
TCS deal wins Axis Securities expects the largest IT major to report deal wins in the range of $9-$11 billion for the September quarter. In the absence of mega deals, the deal trends for TCS for Q2 and Q3 are critical to plug the BSNL impact in FY26, HDFC Institutional Equities said.
Ebit margin Wage hikes during the quarter are likely to result in margin contraction to the tune of 43 basis points sequentially, Axis Securities said. Softer growth in developed market and lower margin profile of BSNL will be key margin headwinds, resulting in flat margin, JM Financial said. On a YoY basis, Sharekhan sees Ebit margin at 24.9 per cent in Q2, up 65 basis points over 24.3 per cent in the same quarter last year..
Revenue growth HDFC Institutional Equities said TCS’ revenue growth may moderate in Q2, impacted by muted performance ex-India with incremental weakness in Retail & CPG (for instance CVS Health) and growth moderation in UK geography despite recent wins such as Primark, Rolls Royce and Mansfield Building.
On YoY basis, Nirmal Bang expects TCS to report a revenue of Rs 64,389 crore, up 7.9 per cent YoY. This would be higher than its estimated Q2 sales growth for Infosys at 5.1 per cent, Tech Mahindra at 3.3 per cent, Wipro at minus 0.3 per cent and LTIMindtree at 6.6 per cent. It would however, be lower than HCL Tech's estimated 8.2 per cent YoY sales growth.
"We expect CC revenue growth of 0.9 per cent with 80 bps cross currency tailwind translating into 1.6 per cent QoQ dollar revenue growth," JM Financial said.
Profit growth On bottom line front, Nirmal Bang expects TCS to report 11 per cent YoY rise in profit at Rs 12,591 crore, which would be higher than that of Infosys (10.8 per cent), HCL Tech (9 per cent), Wipro (10.3 per cent) and LTIMindtree (1 per cent), but lower than Tech Mahindra's estimated 23 per cent growth. Sharekhan sees profit for TCS rising 9 per cent YoY to Rs 11,342 crore. Management commentary While it is to be seen whether TCS will host conference call today following Ratan Tata's demise, analysts said demand outlook in US BFSI, any signs of demand deterioration in continental EU/UK; commentary on deal ramp ups, client decision making and furloughs; and update on BSNL deal ramp and incremental contribution thereof, will be keenly followed.
Besides, investors would look at the overall deal pipeline and key signings and any margin pressure due to large efficiency deals.
Tata Consultancy Services Ltd (TCS) is anticipated to report a 6-11 per cent year-on-year (YoY) growth in net profit for the September quarter on a 7-8 per cent rise in sales. Margin is likely to stay flattish on a sequential basis. All eyes will be on the deal pipeline, pricing scenario, outlook on growth and margins, and interim dividend, if any. Here are 5 key things to watch:
TCS deal wins Axis Securities expects the largest IT major to report deal wins in the range of $9-$11 billion for the September quarter. In the absence of mega deals, the deal trends for TCS for Q2 and Q3 are critical to plug the BSNL impact in FY26, HDFC Institutional Equities said.
Ebit margin Wage hikes during the quarter are likely to result in margin contraction to the tune of 43 basis points sequentially, Axis Securities said. Softer growth in developed market and lower margin profile of BSNL will be key margin headwinds, resulting in flat margin, JM Financial said. On a YoY basis, Sharekhan sees Ebit margin at 24.9 per cent in Q2, up 65 basis points over 24.3 per cent in the same quarter last year..
Revenue growth HDFC Institutional Equities said TCS’ revenue growth may moderate in Q2, impacted by muted performance ex-India with incremental weakness in Retail & CPG (for instance CVS Health) and growth moderation in UK geography despite recent wins such as Primark, Rolls Royce and Mansfield Building.
On YoY basis, Nirmal Bang expects TCS to report a revenue of Rs 64,389 crore, up 7.9 per cent YoY. This would be higher than its estimated Q2 sales growth for Infosys at 5.1 per cent, Tech Mahindra at 3.3 per cent, Wipro at minus 0.3 per cent and LTIMindtree at 6.6 per cent. It would however, be lower than HCL Tech's estimated 8.2 per cent YoY sales growth.
"We expect CC revenue growth of 0.9 per cent with 80 bps cross currency tailwind translating into 1.6 per cent QoQ dollar revenue growth," JM Financial said.
Profit growth On bottom line front, Nirmal Bang expects TCS to report 11 per cent YoY rise in profit at Rs 12,591 crore, which would be higher than that of Infosys (10.8 per cent), HCL Tech (9 per cent), Wipro (10.3 per cent) and LTIMindtree (1 per cent), but lower than Tech Mahindra's estimated 23 per cent growth. Sharekhan sees profit for TCS rising 9 per cent YoY to Rs 11,342 crore. Management commentary While it is to be seen whether TCS will host conference call today following Ratan Tata's demise, analysts said demand outlook in US BFSI, any signs of demand deterioration in continental EU/UK; commentary on deal ramp ups, client decision making and furloughs; and update on BSNL deal ramp and incremental contribution thereof, will be keenly followed.
Besides, investors would look at the overall deal pipeline and key signings and any margin pressure due to large efficiency deals.