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Informist, Wednsday, Oct. 8, 2025

 

By Anjana Therese Antony

 

MUMBAI – Tata Consultancy Services Ltd. is likely to report muted earnings for the September quarter amid uncertainty about US tariffs and the continued impact of its deal with Indian telecom player Bharat Sanchar Nigam Ltd., broking firms said. Some of them also said they have not taken into account the possible impact of laying off about 12,000 employees that the information technology giant had announced in the middle of the quarter. 

 

"We expect muted growth from TCS in 2Q26 (Jul-Sept) as positive momentum in BFSI and tech (verticals) will be largely offset due to weakness in life science & healthcare and communications," HSBC said in its earnings preview report. Wage hikes for junior employees – which came into effect in September – are likely to offset the positive impact of the Indian rupee's depreciation on margins, the brokerage house said. 

 

The Mumbai-based company's consolidated net profit for the quarter is expected to fall almost 2% sequentially to INR 125.62 billion, according to the average of the estimates of 11 broking firms. This is worse than the 4% sequential growth in the bottomline the company had posted in the June quarter. However, this would mean a near 6% on-year growth in the metric, same as that reported in the previous quarter. Nuvama Wealth Management has the highest bottom line estimate of INR 130.58 billion and HDFC Securities has the lowest of INR 123.46 billion. 

 

The IT giant's revenue is seen rising almost 3% on quarter and just 1% on year to INR 651.15 billion, the average of the estimates showed. This is better than the 2% on-quarter fall in the top line TCS had reported in the June quarter. Emkay Global Financial Services has the highest sales estimate of INR 654.73 billion, while Nuvama has the lowest projection of INR 647.38 billion.

 

In constant currency terms, the company's revenue is expected to fall 0.5% sequentially due to a drop in contribution from the BSNL project, Nomura Equity Research said in its pre-earnings report. In May 2023, a consortium led by the IT behemoth had won an INR-150-billion deal from the domestic telecom operator for deploying 4G network across the country. This was a large-scale project for which TCS had to incur third-party expenses and this had hurt the company's margins, analysts had said earlier.

 

The company is scheduled to detail its quarterly results on Thursday. The IT player will not  hold a post-earnings press conference this time as the earnings are being disclosed on the first death anniversary of Ratan Tata, the former chairman of the Tata group. TCS' post-earnings investor call is scheduled for 1900 IST Thursday. Investors will closely watch for the management's comments about demand environment, client budgets, deal conversions, US visa policies, and employee layoffs, various brokerages said. 

 

EMPLOYEES, US POLICIES

Investors will primarily focus on the management's comments about the layoffs it had announced during the quarter. There is speculation that the number of employees laid off will be much higher than the 12,000 TCS had announced. "Benefit from (employee) restructuring may accrue gradually in the coming quarter," HSBC said. 

 

On Jun. 30, TCS' total employee count was 613,069, higher than 607,979 on Mar. 31. The layoff announcement had raised concerns that other IT companies might also adopt such measures. TCS had recently changed its bench policy, reducing the maximum bench period for it employees to 35 days annually. Staff who are not deployed for any project should also spend four-six hours daily to upskill. 

 

What came as a double whammy was a  hike in US H-1B visa fee for new applicants to $100,000 last month. TCS is the second-biggest beneficiary of H-1B visas after Amazon, with more than 5,500 H-1B visa holding employees as of Jun. 30, according to data on the US Citizenship and Immigration Services website. 

 

The visa fee revision came a few weeks after Ohio Senator Bernie Moreno introduced the Halting International Relocation of Employment Act, or HIRE Act, in the Senate, proposing a tax of 25% on those outsourcing services from foreign countries. The proposal was aimed at reducing US entities' or individuals' dependence on foreign employees and focus on hiring manpower in the US.

 

MARGIN

Analysts differ about the company's earnings before interest and tax margin, with some expecting the company's performance to fall sequentially, while a few others anticipate it to be flat, and another section of analysts estimate it to grow sequentially. In the June quarter, the company's EBIT margin had improved by 30 basis points on quarter to 24.5%. 

 

At least four brokerages expect the margin to fall 20-30 bps on quarter due to lower employee utilisation and wage hikes in September. Three other broking houses expect it to be stable as the wage hike is expected to offset the Indian rupee's depreciation. Two broking firms anticipate the margin to grow sequentially and of them, Nirmal Bang Institutional Equities expects it to rise 10 bps to 24.6%. 

 

DEALS

Two broking firms--Prabhudas Lilladher and Nomura--expect the company's deal wins to be in the range of $7 billion-$9 billion during the September quarter while Kotak Institutional Equities expects it to be more than $10 billion. In the June quarter, the company's total contract wins were $9.40 billion, lower than $12.20 billion in the March quarter.  

 

During the September quarter, TCS had won multiple deals, including a seven-year mega deal worth about INR 56 billion from Scandinavia-based non-life insurance company Tryg. The order was to simplify and standardise operations across the insurance company's three major markets and drive its technological transformation. It had also signed a five-year agreement with Indian telecom player Vodafone Idea Ltd. during the quarter to transform the latter's business support system. However, TCS had not disclosed the size of this contract. 

 

Shares of TCS are down 12% since the June quarter results were released on Jul. 10. On Tuesday, the stock closed marginally lower at INR 2,973.70 on the National Stock Exchange. Of the 23 research reports available about the company with Informist, 16 broking firms have a 'buy' or equivalent rating on the stock with an average target price of INR 3,894, which is 31% higher than Tuesday's closing price. Six broking houses have a 'hold' or equivalent rating on the stock and the remaining one has a 'sell' view. 

 

Following are the Jul-Sept earnings estimates for Tata Consultancy Services based on reports from 11 brokerage firms in descending order of the estimate of net profit:

 

Broking firm	Net profit  (in INR million)	Net sales (in INR million)	Revenue (mln $)	EBIT  margin  (in %)
Nuvama Wealth Management Ltd	130,582	647,380	7,433.00	24.7
Kotak Institutional Equities	127,045	651,110	7,432.00	24.6
Motilal Oswal Financial Services Ltd	126,000	654,000	7,492.00	24.3
Prabhudas Lilladher Pvt Ltd	125,300	649,400	7,447.40	24.2
Elara Securities (India) Pvt Ltd	125,112	651,133	7,459.00	--
HSBC Global Research	125,080	648,834	7,436.00	24.7
Nirmal Bang Equities Pvt Ltd	125,053	650,932	7,397.00	24.6
Emkay Global Financial Services Ltd	124,875	654,727	7,466.00	--
JM Financial Institutional Securities Pvt Ltd	124,842	652,973	--	--
Nomura Equity Research	124,417	651,740	7,466.00	24.5
HDFC Securities Ltd	123,460	650,450	7,459.00	4.4
Average	125,615.09	651,152.64	7,448.74	22

 

End

 

US$1 = INR 88.77

 

Edited by Avishek Dutta

 

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