TCS Q1 Preview: Revenue, profit to dip sequentially amid demand uncertainty

TCS Q1 Preview: The IT major is likely to see a 0.21 per cent quarter-on-quarter (Q-o-Q) dip in revenue to ₹64,342.93 crore, according to analysts

Information technology (IT) giant Tata Consultancy Services Ltd. (TCS) will kick off India Inc.'s first-quarter earnings cycle, with analysts expecting a sequential decline in both the bottom and top lines, weighed by the ramp-down in key deals. 

 

The Tata Group's IT arm will report its earnings for the first quarter of the financial year 2025-26 (FY26) on Thursday, July 10.

 

In the period under review, the tech bellwether is likely to see a 0.21 per cent quarter-on-quarter (Q-o-Q) dip in revenue to ₹64,342.93 crore, according to analysts tracked by Business Standard. The drop is attributed to a decline in BSNL revenues, while a flat margin growth is expected due to a lack of any leverage from growth, analysts noted. 

 

 

TCS's bottom line will likely decline by 0.55 per cent to ₹12,156.95 crore amid heightened uncertainty in the demand environment. On a year-on-year (Y-o-Y) basis, the net profit is expected to grow at an average of 0.97 per cent. Analysts expect total contract value to remain within the $7-9 billion range.

 

In the previous quarter, the Mumbai-headquartered firm's net profit slipped 1.3 per cent to ₹12,224 crore sequentially, missing estimates. On the revenue front, the company reported a 0.8 per cent increase to ₹64,479 crore in the March quarter. 

 

The impact of tariff uncertainty, the outlook in financial services and healthcare verticals and reasons for weak margin performance will be the key factors to watch out for, according to analysts.   

Here's how analysts of various brokerages expect TCS to fare in Q1:

Kotak Securities: The brokerage expects TCS to report a 0.4 per cent decline in constant currency revenue in the June quarter, led entirely by a drop in BSNL revenues. 

 

Revenue growth in developed markets is estimated at 0.3 per cent. The brokerage expects earnings before interest and tax (EBIT) margins to decline Y-o-Y despite the deferral of wage hikes that are usually implemented in April. The pressure on margins is attributed to the absence of operating leverage from growth, it said. 

 

Currency tailwinds are expected to help, but Ebit margins will likely remain flat on a sequential basis. Deal wins are projected to stay steady at $8-9 billion, flat compared to the year-ago period. 

 

ICICI Securities: The brokerage expects TCS to report a 3.4 per cent sequential decline in constant currency revenue and a 1.4 per cent decline in US dollar terms for the June quarter, primarily due to a $300 million ramp-down from the BSNL deal. This is expected to be partly offset by resilient performance in international markets, led by the BFSI segment.

 

The brokerage noted heightened uncertainty in the demand environment. Ramp-up timelines for some long-duration projects have been deferred, and the closure of new deal wins remains slow. The most impacted verticals are retail, auto, and telecom.

 

TCS announced several large deals during the quarter, and ICICI Securities expects total contract value to remain within the typical $7-9 billion range.

 

EBIT margin is projected to decline by 23 basis points quarter-on-quarter, with pressure from higher visa costs and lower utilisation due to slower project ramp-ups.  

 

Motilal Oswal: Analysts at the brokerage expect TCS to report a 0.5 per cent sequential decline in constant currency revenue for the June quarter, as clients continue to adopt a cautious approach amid near-term uncertainty.

 

It expects BFSI to remain resilient, while healthcare clients are taking a wait-and-watch approach. Decision-making delays and pauses continue, though without significant deal cancellations.

 

EBIT margins are likely to stay flat quarter-on-quarter, with some pressure from talent investments, lower utilisation, and limited operating leverage. Productivity improvements and pyramid optimisation remain the key margin levers.