Mumbai/New Delhi [India]: Investors are awaiting Tata Consultancy Services' (TCS) June quarter (Q1FY27) results, with expectations pointing to a muted performance as macroeconomic uncertainty and cautious client spending continue to weigh on business.
Analysts expect the IT major to report broadly flat constant currency (CC) revenue growth of around 0.3% to 0.5% for the quarter.
While the quarter had a higher number of working days, much of the expected growth is likely to be driven by inorganic contributions from acquisitions rather than underlying demand.
In reported terms, revenue is expected to rise about 1.4% sequentially. However, operating margins are likely to decline by around 100 basis points, primarily due to the impact of annual wage hikes that came into effect from April.
A weaker rupee is expected to provide some cushion to margins, partially offsetting the wage-related pressure.
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Net profit is projected to decline marginally by around 1.5% sequentially, with most other financial metrics expected to remain largely stable.
Beyond the headline numbers, the company's deal wins will be closely tracked after TCS reported a record $12 billion in total contract value (TCV) during the previous quarter.
Analysts expect deal wins of around $10 billion in Q1.
Investors will also watch for updates on the company's artificial intelligence (AI) business, as the AI has become a major disruptor in the sector.
TCS has been among the early Indian IT companies to disclose AI-related revenue, making this the fourth consecutive quarter in which it is expected to provide such commentary.
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Management's outlook on global macroeconomic conditions and enterprise technology spending will also be in focus, as TCS is the first major Indian IT company to report June quarter earnings, with its commentary likely to set the tone for the rest of the sector's earnings season.
The stocks of TCS traded around Rs 2,059 on the National Stock Exchange (NSE), experiencing a YTD decline of over 36%. The company has been successful in maintaining a strong balance sheet despite facing macroeconomic challenges and discretionary spending cuts. It has maintained a high Return on Equity (ROE) of 61.5%, and an attractive dividend yield of 5.2%.
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