TCS Q4 results preview: Margins, TCV, guidance, divided among key monitorables; check targets

Tata Consultancy Services (TCS) is scheduled to announce its results for the quarter and financial year ended on March 31, 2025 today, that is, April 09, 2025. TCS' results shall officially kick-off the results season for the India Inc. Amid the anticipation of the weak exit for FY25, select factors including margins, guidance commentary, attrition and deal wins shall be in focus for the investors.

HDFC Securities remains watchful and maintains a selective stance on the sector, favouring TCS within large cap space, which may maintain its margin band of 26-28 per cent. HDFC Securities currently has an 'add' rating on the stock with a target price of Rs 4,040.

"We have factored in 50 bps margin improvement for FY26E, supported by rupee depreciation and disinflationary supply-side factors linked to a soft demand environment. The TCV number is going to be muted due to the absence of large mega deals (TCS at $11 billion)," HDFC Securities added.

On deals and contracts, SMIFS expects TCV to be in the range of $11 billion (vs $13.2 bn in Q4FY24 due to absence of large renewal deals).

Nirmal Bang Institutional Equities said that TCS has reported strong deal bookings, but actual revenue conversion has been sluggish, impacting overall growth and expected deal wins to be steady in between $10-11 billion. It has a 'buy' rating on TCS with a target price of Rs 3,973.

Client budgets for CY25, tariff impact; project cancellation and delays; pace of discretionary recovery and visible greenshoots ex-BFSI; and pricing pressure and volume impact due to GenAI led automation shall be key monitorables said Nirmal Bang.

Along with the results, the company board of TCS may recommend a final dividend on the equity shares of the company for the financial year ending March 31, 2025, for the approval of the shareholders at the ensuing annual general meeting (AGM), said the company in the exchange filing.

In the current financial year, TCS has already announced three interim dividends of Rs 10 (in January 2025, October 2024 and July 2024 ) and a special dividend of Rs 66 (in January 2025) for its investors. TCS has had a dividend yield of 4 per cent in the last 12 months, with a total payout of Rs 124 during the same period, suggests a report from Axis Securities.

"We expect TCS to deliver -0.2 per cent QoQ CC revenue growth and -1 per cent QoQ USD decline due to ramp down in BSNL project - offset by strong rebound in developed markets," said Nuvama Institutional Equities. "Margins to remain flat QoQ as BSNL tailwinds to come with a lag. We expect deal-wins to be stable. We will watch out for an outlook on the US macro amid the tariff uncertainty and margin recovery trajectory," it added.

According to InCred Equities, headwinds from re-investments in business, including strengthening of partnership ecosystem, could offset margin tailwinds from INR depreciation, change in mix, and reversal of furloughs. "Conversion of deal pipeline, FSI, retail & manufacturing vertical  commentary, and large deal ramp-up outlook shall be the key monitorables," it said.

Investors should focus on commentary around soft revenues in international business, impact of tariffs and weak macros on business and FY26 outlook, any delay in projects, margin levers, outlook on financial services, state of client spending in US and Europe, SMIFS said.

Shares of TCS settled at Rs 3246.10 on Thursday, falling 1.44 per cent for the day, with a total market capitalization of nearly Rs 11.75 lakh crore. The Tata Group stock has crashed about 30 per cent from its 52-week high at Rs 4,585.90, hit in September 2024. The IT major tested its 52-week low of Rs 3,060.25 earlier this month amid Trump tariff turmoil.

Dollar-denominated revenue growth for Tata Consultancy Services should drop sequentially, due to seasonality-led weakness and uncertain demand environment, noted Elara Capital, which has kept the stock among its top picks from the sector.

TCS is likely to see some headwinds leading to muted growth. Midcaps should continue to outperform large caps in this quarter as well. Margins should remain range bound in absence of any meaningful revenue growth, noted B&K Securities. "Policy uncertainty has resulted in clients adopting the ‘wait and watch’ mode again, which can potentially lead to delayed ramp ups and project deferrals," it said.

India's IT sector is expected to face subdued performance in Q4FY25, with cautious near-term guidance expected by management due to clients reassessing their businesses and reducing discretionary IT spends, said Choice Broking. Recent tariffs are setbacks as key factors to monitor in near-mid term, it added. Choice has a 'buy' rating on the stock with a target price of Rs 4,236.