TCS Q3 results, dividend: Earnings preview, key things to watch today

Tata Consultancy Services Ltd (TCS) Q3 results later this evening are likely to be keenly watched, as investors would wish to hear from the management on the near-term demand outlook and pricing environment. They may also seek updates on the BFSI segment and deal wins.

Analysts are largely expecting TCS to report a flattish constant currency (CC) revenue growth, lower than projections for peers Infosys Ltd and HCL Technologies Ltd. They see a drop in dollar revenue growth sequentially for TCS against a growth for Infosys and HCL Technologies. This would be due to lower BSNL revenue contribution and a seasonal weakness on account of furloughs. However, the numbers will likely partially be offset by a reversal of exceptional items of last quarters. Margin is seen expanding 20-40 basis points, driven by operating efficiencies.

IT analysts see deal wins to be range bound in the $7-9 billion range, due to a lack of mega deal activity.

MOFSL expects TCS to report 8.1 per cent rise in adjusted net profit at Rs 12,730 crore on a 6.4 per cent rise in revenue at Rs 64,500 crore. Ebit margin is seen at 24.5 per cent.

TCS shares have fallen 8 per cent in the past one month and are valued at 30 times FY27E EPS. MOFSL said there is a downside risk to its estimates from the BSNL deal ramp-down in FY26E. The TCS results would help investors set expectations on other IT companies such as Infosys Ltd, HCL Technologies Ltd and Wipro Ltd .

Nirmal Bang sees adjusted profit at Rs 12,744 crore. It recommended investors to monitor BFSI & Hi-tech vertical commentaries, supply-side issues in manufacturing and spending outlook in Europe & UK geographies.

Demand outlook and client budgets for 2025, margin levers and Gen AI project wins should also be on investor radar, it said.

Nuvama sees TCS' profit for the quarter at Rs 12,390 crore and sales at Rs 64,129 crore.

"We expect TCS to deliver 0.1 per cent QoQ CC revenue growth and 0.8 per cent QoQ dollar revenue degrowth due to lower BSNL revenue and furloughs, likely to be partially offset by a reversal of exceptional items of last quarters. Margin would expand 20 bps QoQ driven by operating efficiencies. We expect deal-wins to be stable. Watch out for the outlook on the BSNL deal and margin levels thereof," it said.

Elara Securities expects dollar revenue for TCS to decline 0.8 per cent QoQ, hit by furloughs and ebbing revenue from the BSNL deal. TCS, with wage hike already given in Q1FY25, may see a margin expansion of 40bps QoQ due to deceleration in BSNL deal-related costs, which hit Q2 margins, it said.

Along with its quarterly results, the board of the largest domestic IT services exporter would consider the third interim dividend for FY25. If declared, the said dividend would be paid to the eligible shareholders, whose names appear in the records of the depositories as beneficial owners as on the record date Friday, January 17.