TCS stock slightly up ahead of Q2 earnings; may see moderate revenue, net profit growth

Analysts expect that the softness observed in the past two quarters will continue, even as the company secured significant orders in recent months, as profit realisation will require time.

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Tata Consultancy Services (TCS) shares traded marginally higher by 0.6 percent at Rs 3,650 ahead of the company's fiscal second-quarter earnings and buyback announcement due later in the day on October 11. TCS stock ended at Rs 3,628 on October 10. It has risen about 0.2 percent in two days.

TCS is likely to report moderate growth in its fiscal second-quarter earnings, mainly due to weak discretionary spending in the IT sector, said analysts.

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Analysts expect that the softness observed in the past two quarters will continue, even as the company secured significant orders in recent months, as profit realisation will require time.

TCS is expected to post a profit after tax (PAT) of Rs 11,420 crore, a marginal 3.2 percent increase quarter-on-quarter, according to average estimates of five brokers. As for revenue, it is slated to increase by 1.5 percent to Rs 60,270 crore in the second quarter.

Also Read: TCS Q2 earnings: 5 things to watch out for

Elara Capital, a domestic brokerage firm, suggests that tepid spending in North America and the impact on old managed services deals may dampen momentum. North America is a major customer for the IT giant.

"The large deal win rate around vendor consolidation may determine TCS' position in growth leadership, with the key risk being any revenue leakage or project cancellations related to discretionary projects" added the brokerage firm.

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