TCS Q3 preview: Overseas business seen driving revenue, profit growth

Tata Consultancy Services Ltd. (TCS) will kick-start the third-quarter earnings season for India Inc. on Monday, with brokerages expecting the growth in international business to aid both top and bottom line growth for the technology major. 

 

The Tata Group company is set to announce its financial results for the December quarter of the financial year 2025-26 (Q3-FY26) on January 12 (Monday).

 

During the quarter under review, the tech major is expected to report a 1.21 per cent quarter-on-quarter (Q-o-Q) increase in revenue to ₹66,595 crore, according to consensus estimates compiled by Business Standard. Analysts expect the revenue to be driven mainly by developed markets and in BFSI and hi-tech verticals. 

 

 

TCS's bottom line will likely jump by 6.9 per cent to ₹12,908.7 crore even amid expectations of a decline in the tech major's margins. On a year-on-year (Y-o-Y) basis, the net profit is expected to grow at an average of 4.27 per cent. Analysts expect total contract value to remain within the $10-$11 billion range.

 

In the previous quarter, the IT major reported a net profit of ₹12,075 crore, up 1.4  per cent Y-o-Y. Revenue rose by 2.4 per cent to ₹65,799 crore, beating estimates. 

 

Analysts said key factors to watch will include TCS’s measures underway to accelerate revenue growth, deal pipeline, and overview of client budgets and progress on planned data centre investments, among other major things.   ALSO READ | Q3FY26 results preview: IT companies' growth likely to remain muted

Here's how analysts of various brokerages expect TCS to fare in Q3:

Kotak Securities: The brokerage expects the TCS to report largely flat sequential revenue, driven by a 0.7 per cent sequential growth in its international business, partly offset by a 4.5 per cent constant-currency (CC) decline in the India business.

 

The brokerage expects Ebit margins to remain stable, as the impact of planned investments is likely to be offset by rupee depreciation. It added that profit and loss charges related to employee separation have not been factored into its estimates.

 

Kotak Securities also expects the total contract value for the quarter to be in the range of $10-11 billion. According to the brokerage, investor focus will remain on the company’s renewed aggression and higher investments aimed at accelerating growth.

 

Motilal Oswal: Analysts expect TCS to report a 0.5 per cent Q-o-Q revenue growth in constant currency terms, led by around 0.5 per cent growth in the international business and the ramp-up of the BSNL project. The brokerage said management commentary on near-term demand trends, client technology budgets, artificial intelligence data centres and deal wins will be key monitorables.

 

Motilal Oswal expects Ebit margins to decline by around 30 basis points sequentially due to the two-month impact of wage hikes, steady ramp-up of the BSNL deal and costs related to redundancies.

 

It added that recent acquisitions such as ListEngage and Coastal Cloud should provide near-term growth support, with commentary on the realisation of synergies from these acquisitions also in focus.

 

Systematix Research: The brokerage expects TCS to report a 0.2 per cent sequential growth in its US dollar revenue, led by growth in the banking, financial services and insurance and hi-tech verticals.

 

The brokerage estimates Ebit margin at 25.3 per cent, a 14 basis point sequential improvement, factoring in the two-month impact of wage hikes and furloughs, which is expected to be offset by currency tailwinds, pyramid optimisation and productivity gains driven by artificial intelligence.

 

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