Tata Consultancy Services (TCS) is set to kick off the Q1 FY25 results season, with a promising revenue boost, thanks to a perfect storm of deal ramp-ups, extended working days, favorable cross-currency trends, and a brightening macroeconomic horizon. According to estimates from 10 brokerage firms compiled by Moneycontrol, TCS’s revenue is anticipated to rise 1.6 percent quarter-on-quarter to Rs 62,190 crore in Q1 FY25.
The momentum from the BSNL deal is expected to bolster TCS's growth, according to various research reports. In April, TCS announced its plan to set up large data centres across four regions of the country as part of a Rs 15,000-crore deal with Bharat Sanchar Nigam.
TCS is scheduled to announce its earnings for the June quarter, on July 11. Despite the revenue uptick, TCS is forecasted to face a 3.5 percent dip in net profit for Q1 FY25, settling at approximately Rs 11,999 crore.
The average of 10 estimates shows that the EBIT margin of TCS is expected to contract by 130 basis points quarter-on-quarter to 24.7 percent, primarily due to wage hikes effective April 1 and a double-digit hike for top performers.
“Wage hike is the major margin headwind for TCS. We however expect its impact to be partially offset by operational efficiencies,” JM Financial said in its research report.
Kotak Institutional Equities anticipates a quarter-on-quarter decline in operating margin, attributing this to wage revisions and a probable decrease in utilisation rates.
ICICI Securities highlighted that revenue growth in the June quarter would be driven by traction in BFSI, retail (consumer business group), and hi-tech sectors.
Also Read | TCS Q1FY25 earnings: Five factors to watch for
Analysts are eagerly awaiting the management’s commentary on several key aspects: the demand environment across geographies, discretionary spending, fewer deal announcements in Q1 FY25, campus hiring, and large deals. Additionally, insights into cost takeout projects, the banking vertical, and the turnaround in BFSI will be crucial focal points for brokerage houses. Kotak noted that investors will be keenly watching the impact of GCC ramp-ups on growth.
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