Tata Consultancy Services (TCS) is projected to achieve single-digit growth in revenue and profit during the April-June quarter of fiscal year 2024-25 (Q1FY25) compared to the same period last year. This growth is attributed to a recovery in the flow of business and clients’ willingness to resume discretionary spending. However, TCS may face margin pressure due to wage hikes.
The company is set to release its Q1 results on Thursday. According to brokerage estimates, TCS is expected to report a net profit ranging from ₹11,771 crore to ₹12,140 crore for the June quarter, representing a 6-9 per cent year-on-year (Y-o-Y) increase compared to Q1FY24’s net profit of ₹11,074 crore. Sequentially, there could be a slight dip of 3-5 per cent.
Revenue is anticipated to grow by 4-5 per cent Y-o-Y, with estimates ranging between ₹62,086 crore and ₹62,491 crore.
Nuvuma Securities predicts that TCS will achieve 14 per cent quarter-on-quarter (Q-o-Q) CC revenue growth and 1.1 per cent Q-o-Q US Dollar growth, driven by recovery in the BFSI sector and continued strength in manufacturing. However, they also expect margins to decline by 140 basis points (bp) Q-o-Q due to wage increases.
Kotak Institutional Equities attributes TCS’s revenue growth to strong order signings from previous quarters, including $150 million from the BSNL deal. This would lead to marginal growth compared to the March 2024 quarter.
ICICI Securities estimates a 1.8 per cent Q-o-Q CC revenue growth for TCS, driven by traction in BFSI, retail (consumer business group), and hi-tech segments from deals announced in Q1. They also anticipate a 186 bp Q-o-Q decline in EBIT margin due to higher employee costs. The brokerage eagerly awaits management commentary on enterprise discretionary spending, deal announcements, campus hiring, large deals, and the BFSI sector’s turnaround.