TCS Q1 Results Preview: Muted Growth Seen Amid BSNL Headwinds; Discretionary Outlook, Margin In Focus

Tata Consultancy Services Ltd. is set to announce its earnings for the April-June quarter on Thursday and analysts expect the company to post muted sequential growth as headwinds from the BSNL deal ramp-down offset gains in international markets.

India’s largest software services provider’s revenue growth is likely to be modest in constant currency terms, with foreign exchange gains providing support in reported figures, according to analysts. Meanwhile, the EBIT margin are expected to remain stable or see a slight improvement, driven by the near-completion of the BSNL project, partial deferral of wage hikes, and continued growth in international markets.

Analysts are also watching for commentary on discretionary spending, deal wins, vertical performance, and any updates on employee costs.

TCS’ growth in the quarter is expected to be softer compared to the March quarter, according to analysts. While the BSNL drag is expected to fade from the second quarter, it will weigh on the current quarter’s performance. Headcount is likely to rise sequentially, in line with expected demand from international clients.

The IT firm’s consolidated revenue is seen up 3.2% sequentially at Rs 64,627.9 crore, according to analysts consensus estimates tracked by Bloomberg. While EBIT is expected to rise 1% quarter-on-quarter to Rs 15,703 crore, EBIT margin is estimated to come in at 24.29%, down from 24.91% in the previous quarter.

• Revenue seen 3.2% higher at Rs 64,627.9 crore versus Rs 62,613.20 crore.

• EBIT seen 1% higher at Rs 15,703 crore versus Rs 15,601 crore.

• EBIT Margin seen at 24.29% versus 24.91%.

• Profit seen little changed at 12,251 crore versus Rs 12,224 crore.

Here's what analysts are expecting from TCS while it reports its first quarter results.

• Growth to be lower compared to March quarter as BSNL ramp down fully offsets growth in international markets.

• Expects recently announced BSNL deal to ramp up from the second quarter.

• Expects margin to modestly expand, driven by growth in international markets, BSNL nearing completion, deferral of wage hike partially offset by lower employee utilisation.

• Expects headcount to increase, driven by growth in international markets.

• Soft quarter supported by foreign exchange with limited chances of guide-ups

• We believe TCS will face headwinds on growth in FY26 from ramp down of the BSNL deal.

• Expects TCS revenue in constant currency terms to decline by 0.5% on a sequential basis during April-June period.

• We anticipate revenue growth in constant currency terms to be the range of -2.7% to +1.4% on a sequential basis for Tier I companies.

• Weak growth, largely optimised levers and strong INR will pose as headwinds for IT players.

• Margins are expected to be stable across most players.

• While the growth outlook remains cloudy in the near term, valuation multiples are not inexpensive.

• Watch out for: discretionary spending outlook, deal pipeline, vertical commentary, margins outlook, wage hikes announcement.

• The IT sector is expected to post mixed revenue growth in June quarter, with tier-1 reporting muted CC revenue growth

• There is a huge cross-currency tailwind in the quarter, which will result in strong USD growth on a sequential basis.