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TCS Results Preview: Q1FY25 Expectations

11 July 20243 mins read by Angel One
TCS's Q1FY25 results are expected to show 1.5% revenue growth to Rs.62,170 crore, but margins may drop to 24.5% due to wage hikes and other factors.
TCS Results Preview: Q1FY25 Expectations
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Tata Consultancy Services (TCS), India’s largest IT services company, is set to announce its Q1 earnings for FY25 today. Analysts polled on different media channels anticipate an increase in revenue but expect a decline in profit and margins.

Projected Revenue 

Analysts predict TCS will see q-o-q revenue growth of 1.5%, reaching Rs.62,170 crore compared to Rs.61,237 crore in Q4FY24. Dollar revenue is also expected to rise 1.3% sequentially, from $7,363 million to $7,456 million attributed to the previous deals, though it may be partly offset by the BSNL deal and some revenue leakages in the portfolio.

Margin Outlook

For FY25, TCS is expected to register growth between 4.4% and 7.5%, with further improvement projected for FY26, ranging from 7.6% to 9.8%. Despite this, as per the reports, TCS’s margins are anticipated to decline by 150 basis points due to wage hikes effective from April 1, 2024. In the previous quarter, TCS managed a 26% margin, but this figure might slip to 24.5% in Q1FY25.

EBIT and Profit Estimates

EBIT is projected to be around Rs.15,262 crore for the quarter under review, down from Rs 15,918 crore in the same quarter last year. This decline comes amidst a 0.5% depreciation of the rupee against the dollar. For FY25, analysts expect the EBIT margin to remain in the range of 25% to 25.6%, with a potential improvement to 25.5%-26.2% in FY26.

Net profit for Q1FY25 is forecasted to be between Rs.11,771 crore and Rs.12,140 crore, reflecting a 6-9% y-o-y increase from Rs.11,074 crore in Q1FY24. Revenue for the same period is expected to grow by 4-5% y-o-y, ranging between Rs.62,086 crore and Rs.62,491 crore.

Market Performance and Dividend 

TCS is also expected to announce its interim dividend for FY25 post-stock market hours today. Despite a challenging quarter for the domestic IT sector, TCS is likely to report a 4-9% y-o-y increase in profit on the back of a 5% rise in sales. Deals are anticipated in the range of $10-12 billion, although wage hikes are expected to result in a contraction in margins.

Conclusion: In conclusion, the upcoming Q1FY25 results will provide insights into how the company navigates these declines and sets the stage for its performance throughout the fiscal year.TCS’s strategies to maintain profitability while driving growth in a competitive IT services market will be interesting to watch.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.

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