TCS Q4 Results Preview: Revenue Growth To Remain Modest, Outlook On US Macro Eyed

IT major Tata Consultancy Services Ltd. will be kicking off the IT results season on April 10. The company is expected to report modest revenue growth as business in developed markets remains soft and revenue from BSNL deal declined. While margins are expected to see a marginal rise, deal wins are to remain stable with all eyes on outlook for the next year. 

Net profit may rise 3% sequentially to Rs 12,765 crore for the quarter ending March 31, 2024, according to the consensus of analysts' estimates tracked by Bloomberg. Revenue is expected to marginally rise by 1% for the period to Rs 64,837, per estimates. 

• Revenue seen 1% higher at Rs 64,837 crore versus Rs 63,973 crore.

• EBIT seen 3% higher at Rs 16,142 crore versus Rs 15,660 crore.

• EBIT margin seen at 24.89% versus 24.47%.

• Profit seen 3% higher at Rs 12,765 crore versus Rs 12,380 crore.

Kotak Institutional Equities forecasts flat revenues for the international business and $30 million decline in BSNL revenues. The net result is 0.3% decline in revenues in constant currency terms. “The benefit of rupee depreciation will be eaten away by promotions and investments in business, resulting in disappointing margin performance. We expect steady deal wins of $11 bn. This is a decline from $13.2 bn last year, which included certain large renewals,” the brokerage said. 

Morgan Stanley expects TCS to report -0.4% quarter-on-quarter revenue growth and with cross currency headwinds of another 70 basis points, reported revenue growth could be approximately -1.1% QoQ. Margins are expected to be largely flattish (10bps QoQ to 24.6% in Q4 FY25) as currency deprecation (NR vs USD) and a tapering of low margin India business, is largely offset by investments in building the talent pool. 

“For developed markets (North America, UK, Continental Europe) we expect softness in this segment driven by a combination of macro and industry-specific issues. Within growth markets, we expect the India geography to continue to inch down with a large telecom contract reaching peak revenues already,” it said. 

Revenue growth is anticipated at 6.4% YoY driven by BFSI vertical and consumer business. Despite no mega deals, the deal pipeline remains robust, with increased focus on application modernisation and data driven projects, brokerage Deven Choksey noted. 

• Outlook on US macros.

• Deal's total contract value and closure cycle.

• India revenue trajectory.

• Outlook for developed market business.

• Margin expansion expectations.

In the third quarter, employee headcount decreased by 5,370 employees, bringing the total to 6,07,354. Attrition rate in the quarter inched up to 13% from 12.3% in last quarter. 

TCS’ updates on hiring plans including freshers and laterals for FY26, are to be watched out for, as revival in hiring is expected to be on a backfoot with geopolitical movements impacting the demand environment.