Tata Consultancy Services (TCS), which will report its October-December earnings on Thursday, is expected to report muted revenue growth for the quarter. However, analysts expect a boost in its margins due to operational efficiencies and favourable cost structures.
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According to Bloomberg estimates, the IT firm’s revenue for Q3 FY25 is projected at Rs 64,754 crore, reflecting a modest 0.8% sequential growth. Ebitda is expected to rise by 3.7% to Rs 17,351 crore, with net profit estimated at Rs 12,541 crore, marking a 5.8% quarter-on-quarter increase.
Analysts attribute the muted revenue performance to seasonal furloughs and reduced contributions from Bharat Sanchar Nigam (BSNL). Nuvama analysts forecast a 0.1% growth in constant currency (CC) terms, with a 0.8% decline in dollar revenue. JM Financial estimates a $60 million dip in BSNL revenues for TCS during the quarter.
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However, signs of recovery in the BFSI sector in North America and growth in other regions offer a positive outlook. “Recovery appears to be expanding beyond US BFSI – which continues to strengthen – into additional industry verticals such as hi-tech, which is recovering ahead of schedule,” Motilal Oswal said in its sector preview.
Despite subdued revenue growth, operational efficiencies are expected to bolster margins. Motilal Oswal projects a 40-basis-point improvement in EbitT margins, driven by investments in talent development, training, and the absence of wage hikes. Similarly, JM Financial expects a 20-basis-point margin expansion, aided by lower revenues from the low-margin BSNL deal.
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According to analysts, key metrics such as the total contract value (TCV) of deal wins, hiring trends, offshoring ratios, and deal pipeline conversions, needs to be monitored. “TCS’ growth will continue to be led by regional markets and large deal wins,” noted HDFC Securities.
While the topline growth remains subdued, TCS’ focus on operational efficiency and diversified regional performance is likely to support healthy margins, according to analysts.
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