TCS to share Q1 results, dividend on Thursday, July 11. Earnings preview, key things to watch

Tata Consultancy Services Ltd (TCS) is all set to announce its June quarter results on Thursday, July 11, post stock market hours. The board of largest domestic software exporter would also consider an interim dividend proposal the same day. Analysts largely expect TCS to report a contraction in margin on a sequential basis. They believe revenue growth in both dollar and constant currency (CC) terms may come in below that of peer Infosys' on QoQ basis. On year-on-year basis, profit is seen rising 4-7 per cent on 5 per cent rise in revenue. Deal wins are expected in the $10-12 billion range.

On year-on-year basis, ICICI Securities expects TCS to report 5.9 per cent rise in adjusted net profit at Rs 11,731 crore, up 5.9 per cent. It sees sales to increase 5.2 per cent YoY to Rs 62,491 crore. Ebit margin is seen falling 192 basis points QoQ to 24.1 per cent against 26 per cent in March quarter, up 90 basis points higher than 23.2 per cent in the June quarter last year. The sequential fall in margin would be on account of higher employee costs as wage hike was effective from April 2024 and high performers were given double-digit hikes.

"We await management commentary on: 1) enterprise discretionary spending. 2) fewer deal announcements in Q1FY25. 3) campus hiring. 4) large deals 5) turnaround in BFSI," it said.

Antique Stock Broking sees profit for TCS jumping 7 per cent YoY to Rs 11,853 crore on 4.6 per cent on 4.6 per cent rise in sales at Rs 62,094 crore. Antique sees a 180-basis point hit on Ebit margin.

"We forecast 1.5 per cent revenue growth QoQ in constant currency. Expect dollar revenue growth to be 1.4 per cent QoQ, with 10 bps headwind from cross currency. We have built similar contribution from BSNL as ramp-up may be slow because of the elections. Expects margin to decline by 170 bps to 24.3 per cent, largely impacted by wage hike of 200 bps, partially offset by operational efficiency and lower sub-contracting cost. Expect deal bookings to remain strong at above $10 billion," it said.

Update on BSNL's ramp-up schedule, demand trends, and momentum around deal wins will be investors' key focus areas, Antique said.

Kotak Institutional Equities sees TCS' deal wins at $11-12 billion, driven by a high rate of closures of cost takeout deals. Renewal component in deals will be higher, it said.

The focus will be on TCS’s ability to leverage its strengths in 'run' spends and outperform on revenue growth in FY2025, Kotak said.

"TCS has won quite a few mega deals, which can contribute to 2.5 per cent growth in FY2025E. We expect investor focus on (1) the outlook in the financial services vertical and any loss of share to insourcing at large clients, (2) state of spending in the impacted North American market, and the financial services, hi-tech and telecom verticals, (3) pipeline of deals, (4) state of discretionary spending and what would it take to revive the same, (5) impact of GCC ramp-up on growth of companies and (6) levers to defend and increase margins," it said.