TCS Q3 Results Preview: Margin Seen Expanding Despite BSNL Overhang

Tata Consultancy Services Ltd. is expected to report higher revenue and profit in the December quarter, with margins seen expanding even as growth remains constrained by the BSNL ramp-down and the impact of wage hikes. The software developer will report its third-quarter results on Monday.

Bloomberg estimates point to a 2% sequential rise in revenue, alongside an 8% increase in both operating profit and net profit. EBIT margin is seen expanding to 25.02% from 23.45% in the previous quarter.

• Revenue 2% higher at 66,849 crore versus Rs 65,799 crore

• EBIT seen 8% higher at Rs 16,732 crore versus Rs 15,430 crore

• EBIT margin seen expanding to 25.02% versus 23.45%

• Profit seen 8% higher at Rs 13,006 crore versus Rs 12,075 crore

However, revenue growth in constant currency terms is expected to decline 2.18%, underscoring continued pressure on underlying growth. Attrition is projected at 7.6% over the past 12 months, while total headcount is expected to be at 597,093.

The December quarter is expected to reflect easing delays and deferrals in select verticals, while margin movement will be shaped by the two-month impact of wage hikes for junior employees, furloughs, and restructuring-related costs. Analysts will closely track demand trends in key markets, deal wins, and commentary on the timeline for any ramp-up under the BSNL project.

Here’s what analysts are expecting from TCS Q3 results announcement:

Investec

• Expect 0.8% quarter-on-quarter growth in constant currency and 0.5% growth in US dollar terms.

• Delays and deferrals likely to have reduced, with a potential turnaround in the communications, media and entertainment vertical.

• EBIT margin expected to be impacted by the two-month wage hike for junior employees.

• Severance costs treated as a one-off below the EBIT line.

• Q4 could strengthen if BSNL ramp-up begins and earlier deal closures translate into revenue.

Jefferies

• Revenue expected to rise 0.5% quarter-on-quarter in constant currency, led by international markets, with no contribution from the BSNL deal.

• Margins expected to increase by 50 basis points, supported by headcount reduction and rupee depreciation, partly offset by wage hikes and furloughs.

• Deal wins likely to be in the $7 billion to $9 billion range.

• Exceptional item related to severance pay of Rs 800 crore expected.

• Focus areas include BFSI demand, North America and Europe, calendar year 2026 budgets, restructuring impact on margins, BSNL phase-two ramp-up timeline, H-1B visa fee impact, and artificial intelligence adoption.

UBS

• Growth continues to be impacted by the BSNL ramp-down.

• Margins expected to decline slightly due to furloughs, partly offset by rupee depreciation.

• Deal wins expected in the $7 billion to $9 billion range.

Nuvama

• Expect 0.5% quarter-on-quarter constant currency growth and 0.2% growth in US dollar terms.

• Growth driven by developed markets, as execution on the BSNL extension deal has not started.

• Margins likely to decline by about 60 basis points due to the two-month wage hike impact.

• Key watch points include the US macro outlook and updates on employee restructuring.