TCS to Log a Steady Q3 Amid AI Pivot, IT Spending Trend in Focus
Tata Consultancy Services (TCS), the country’s largest IT exporter, is on track to record its fifth consecutive quarter with less than 1% sequential top-line growth in dollar terms. The company is set to declare its quarterly performance on Monday. These estimates are informed by a survey from the ET Intelligence Group (ETIG) and insights from 11 brokerage firms.
Expected Revenue Growth Amid Seasonal Weakness
– Projected Revenue: TCS is expected to see a slight sequential improvement of 0.3%, bringing revenue to approximately $7,486.6 million for the December quarter. This growth reflects typical seasonal weakness due to holiday impacts and a slow recovery in discretionary client spending.
– In Rupee Terms: Revenue is anticipated to rise by 1.4%, reaching around ₹66,715.4 crore, with net profit expected to grow by 1% to approximately ₹13,035 crore. The operating margin may improve by 20-40 basis points from 25.2% in the previous quarter, driven by a depreciation of the rupee against the dollar.
Factors Behind Modest Growth Projections
– Seasonal Influences: Market analysts highlight that TCS is facing headwinds of seasonal softness, characterized by reduced billing days in international markets. Additionally, a lack of significant ramp-up in the BSNL deal further contributes to modest growth forecasts.
– Currency Fluctuations: Anand Rathi Share and Stock Brokers have noted adverse cross-currency impacts, with the British pound, euro, and rupee each depreciating against the US dollar by 1.4%, 0.4%, and 2.1% respectively.
Key Drivers for TCS’s Performance
Given the volatility in the global landscape and growing investments in artificial intelligence (AI), it’s crucial to monitor management’s commentary on:
– IT Budget Trends for 2026: Insights into clients’ future budgets could signal the direction of IT spending trends.
– Order Pipeline: The success of planned initiatives, particularly in AI implementation, will be vital for revenue growth.
HCL Technologies and Industry Context
As a point of industry comparison, HCL Technologies, India’s third-largest software exporter, is also set to announce its third-quarter results. HCL is expected to achieve:
– Revenue Growth: Anticipated growth of 2.1% sequentially to $3,721.8 million, supported by positive momentum in its products and platforms segment.
– Operating Margin Improvement: A rise of 60-100 basis points from 17.5% in the previous quarter, driven by cost optimization efforts.
In conclusion, while TCS may report a steady Q3 with limited growth, the focus will remain on the evolving trends in IT spending and AI adoption, setting the stage for future quarters. Observing these patterns will provide valuable insights into the broader technology landscape and TCS’s strategic positioning within it.