TCS Q2 performance impresses but investors may stay on sidelines, say analysts

The company’s order book at the end of Q2FY24 stood at $11.2 billion, in line with analyst estimates of $11-13 billion and the book-to-bill ratio stood at 1.6

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26 Aug, 2025 12:21

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Tata Consultancy Services’ (TCS)  performance during the second quarter of the fiscal year 2024 was lauded by analysts, who expect the company’s outlook to be positive. However, they believe it is not enough to attract new investors to stocks.

TCS reported a 9 percent year-on-year (YoY) growth in consolidated net profit for the quarter ended September 2023 to Rs 11,342 crore. Consolidated revenue grew nearly 8 percent YoY to Rs 59,692 crore.

Also read: TCS to buyback Rs 17,000 crore worth of shares at 15% premium

“TCS reported Q2 earnings that met street expectations while the buyback price was below expectations and even below the last buyback price,” said Prashanth Tapse, Senior VP (Research), Mehta Equities. “US Dollar revenue declined for the first time in many quarters while Q2 EBIT Margin was better than expectations.”

Tapse believes that reacting to Q2 numbers and the buyback announcement, there is a high probability of a neutral to negative opening for the TCS stock tomorrow morning.

Its EBIT margin for the quarter increased to 24.3 percent compared to 23.2 percent (QoQ). The dollar revenue for the IT major stood at $7,210 million. The company’s numbers were driven by a strong order book, especially in the BFSI segment, despite a tough business environment.

Sequentially, PAT beat estimates but rupee revenue growth came in below estimates. In dollar terms, the revenue declined by 0.2 percent from the previous quarter to $7.2 billion.

“TCS’ Q2FY24 result demonstrates a promising outlook for the company's sustained growth. Notably, TCS has secured a substantial order book, registering its second-highest TCV in a quarter. Efforts to boost employee utilisation, enhance productivity and improve cost efficiency have led to an impressive QoQ growth in operating margin,” said Dhruv Mudaraddi, Research Analyst, StoxBox.

The company’s order book at the end of Q2FY24 stood at $11.2 billion, in line with analyst estimates of $11-13 billion and the book-to-bill ratio stood at 1.6. The order book is higher than the $10.2 billion TCV it had in the previous quarter. The EBIT margin or the operating margin was up to 24.3 percent, an expansion from 23.2 percent in the previous quarter as the company recovered from the wage hike cycle in the April-June period.

Also read: TCS says it completed investigation into bribes-for-jobs scandal, action taken against employees

“By continuing to adapt to evolving client needs and fostering innovation, we believe TCS is poised to maintain its upward trajectory. We will be keeping a close eye on management guidance for future performance and their outlook on the demand scenario in North America and Europe in the coming quarters,” said Mudaraddi.

Also read: TCS has 250 staff in Israel, says it is in touch with customers & employees on continuity plans

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