India’s leading IT services firm, Tata Consultancy Services (TCS), is set to begin the earnings season amid expectations of subdued growth and tight margins. This comes against a backdrop of global uncertainty, wage pressures, and a significant workforce restructuring initiative. TCS’s upcoming second-quarter results are crucial as the broader Indian IT industry faces challenges in regaining momentum.
Analysts anticipate moderate year-on-year growth in revenue and profit for TCS. Net profit estimates range from Rs 12,346 crore to Rs 13,058 crore, representing a 3.7%–9.6% increase from the previous year. Revenue projections fall between Rs 64,200 crore and Rs 65,700 crore, indicating a rise of 0.7%–2.2% year-on-year.
While margins are expected to remain stable overall, some analysts foresee a slight sequential decline due to recent wage hikes for junior staff and lower utilization following the company’s restructuring efforts. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, emphasized the challenges faced by IT stocks despite recent recoveries, citing muted earnings expectations and other sector-specific pressures.
Of particular interest this quarter is TCS’s planned separation of 12,000 employees, about 2% of its workforce. Investors are keen to understand the impact on morale, restructuring costs, and potential savings resulting from this efficiency drive. The company’s handling of this initiative could influence its financial performance in the September quarter.
With nearly half of its revenue coming from North America, TCS faces pressure from softening US demand and uncertainties introduced by President Trump’s tariff policies. Analysts highlight macroeconomic concerns and the need for TCS to sustain deal momentum in its largest market.
The rupee’s depreciation provides some cushion, but wage hikes ranging from 4.5% to 7% for the majority of employees are expected to offset much of this benefit. Opinions are divided on margin trends, with projections ranging from flat to a minor uptick, influenced by various factors including currency movements and wage pressures.
TCS’s performance in key sectors like banking and financial services will be closely watched, with analysts expecting mixed growth across different verticals. The company’s recent EUR 550 million deal with Tryg and overall contract value expectations signal a healthy pipeline, although challenges related to generative AI adoption and pricing pressure persist.
Concerns also linger around H-1B visa dependency and the rise of global capability centers, which pose challenges to traditional outsourcing models. Analysts will scrutinize TCS’s strategy to navigate these issues and the evolving landscape of IT services.
Despite short-term uncertainties, historical trends suggest a positive stock performance post-Q2 results for TCS. The company’s quarterly results carry significance not only for its own trajectory but also for the broader Indian IT industry’s response to evolving market dynamics and technological shifts. TCS’s ability to navigate these challenges will shed light on the sector’s resilience amidst a changing global landscape.