Tata Consultancy Services (TCS) is set to announce its September-quarter results today, with investors looking for signs that the country's largest IT services company is moving towards a broader recovery after a prolonged period of muted technology spending. While revenue growth is expected to remain modest, deal wins, margins, artificial intelligence-led disruption and the demand outlook across key verticals are likely to matter more than the headline profit number.
Here are five key things investors should watch:
Revenue Growth And Demand Recovery
TCS is expected to report a 1.2% quarter-on-quarter increase in revenue to Rs 73,152 crore from Rs 72,275 crore in Q1, according to Bloomberg estimates. Net profit is projected to rise 3.3% to Rs 13,794 crore, while EBIT is expected to increase 2.8% to Rs 17,802 crore.
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
In constant-currency terms, brokerages are expecting revenue growth of around 0.4-0.8% sequentially. Jefferies and ICICI Securities expect 0.6% growth, while Citi estimates 0.7% and JPMorgan 0.4%.
The key question will be whether the improvement is broad-based or largely driven by a few pockets. BFSI is expected to remain a key growth engine, while manufacturing could show signs of recovery. Retail and communications, media and technology are expected to remain relatively softer.
Margins After Q1 Wage Hikes
Margins will be another major focus. TCS reported a 24% operating margin in Q1 after absorbing the impact of wage hikes, and Bloomberg expects EBIT margin to improve to 24.33% in Q2.
Most brokerages see either stable or modestly higher margins. ICICI Securities and Systematix expect a 10-basis-point improvement, while HSBC sees operating margin expanding by around 35 basis points, helped by favourable currency movement and partial absorption of the wage-hike impact. Jefferies, however, expects margins to remain broadly steady, arguing that any excess profits could be reinvested into the business.
READ | TCS Q2 Performance: How The IT Giant Has Fared Over The Last Five Years
Investors will therefore watch whether TCS can maintain its longer-term ambition of exiting FY27 with margins at 25% or higher.
Deal Wins And Conversion Into Revenue
Deal TCV could arguably be more important than the quarterly revenue number. TCS reported $9.5 billion of total contract value in Q1, and most brokerages expect Q2 TCV to remain around $9-10 billion, with some estimates extending towards $10-11 billion. Citi expects TCV of around $9-10 billion, while Systematix and ICICI Securities expect a similar range. Jefferies also sees deal wins remaining steady at $9-10 billion.
The focus, however, will be on whether these wins are translating into revenue growth. Healthy TCV without faster ramp-ups could indicate that clients continue to delay technology spending despite signing large contracts.
AI Impact And The Business Model
Artificial intelligence remains one of the biggest structural questions for the IT services sector. TCS' annualised AI services revenue reached $2.6 billion in Q1 fiscal 2027, up 13.6% sequentially. Investors will want to understand whether AI is creating new revenue pools for TCS or beginning to pressure traditional application development and maintenance work.
CLSA said TCS is not seeing incremental deflation from AI and that win ratios have not deteriorated. The brokerage also believes BFSI and technology services continue to lead growth.
At the same time, investors will be looking for management commentary on how AI is changing client spending, pricing, productivity and the company's hiring requirements.
BFSI, Geography And The Broader Demand Outlook
The demand commentary could ultimately determine the stock's reaction. Jefferies expects growth to be led by the UK, Europe and India, while HSBC expects international business to support growth. BFSI is expected to remain a key driver, with CLSA, Jefferies and Systematix all highlighting the vertical's strength. Manufacturing is also expected to recover, although retail remains under pressure.
Another important factor will be the second phase of the BSNL deal. Jefferies has flagged the deal's progress, along with the impact of AI on growth and execution, as key areas to monitor.
JPMorgan believes TCS' business model remains intact and expects the company to benefit when the technology spending cycle eventually turns. However, it has flagged a stronger rupee, weaker-than-expected revenue growth, lower technology spending and weak US economic activity as key downside risks.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
