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Informist, Tuesday, Oct. 6, 2026

 

By Arya S. Biju

 

MUMBAI – Information technology services sector bellwether Tata Consultancy Services Ltd. is expected to follow up on its lukewarm June quarter performance by showcasing subdued earnings for the September quarter, thanks to artificial intelligence-led cost pressures, slower ramp-up of deals, and no meaningful improvement in the demand environment. The company's top line for the quarter is seen rising at its slowest pace in five quarters on a sequential basis, while the bottom line is seen falling for the second straight quarter. Its operating margin, on the other hand, is largely expected to improve sequentially due to the absence of wage hikes and improving operational efficiency. 

 

Though the September quarter is seasonally strong for IT companies, most large-cap players in the sector are seen reporting subdued earnings this time, with clients adopting a cautious spending approach amid persistent macroeconomic uncertainties. Pricing pressure linked to AI-led productivity, slower conversion of mega deals, and higher AI-related investments are also seen impacting the earnings of these companies, analysts said. 

 

The consolidated net profit of TCS for the quarter ended September is expected to fall around 2% sequentially to INR 137.58 billion, according to the average of estimates from 11 brokerages. Though the metric is seen rising over 4% year-on-year, this will be the slowest on-year rise in three quarters.

 

Motilal Oswal Financial Services Ltd. has the highest estimate for the company's net profit at INR 144.40 billion. The lowest estimate of INR 133.75 billion is from Anand Rathi Share and Stock Brokers Ltd., which expects the company's earnings to be impacted by tepid discretionary spending and weakness in its manufacturing, retail, and West Asia businesses. 

 

India's largest IT firm by market capitalisation is expected to report a consolidated revenue of INR 730.82 billion for the quarter, up over 1% sequentially and over 11% on year, according to the average of 11 estimates. Dolat Capital Market Pvt. Ltd. has the highest estimate of INR 734.28 billion for the company's top line while Nirmal Bang Equities Pvt. Ltd. has the lowest estimate of INR 725.18 billion.

 

The company's revenue in constant currency terms for the quarter is expected to rise 0.4-1.0% sequentially, according to estimates from six brokerages. In the June quarter, the company's constant currency revenue had grown 0.4% sequentially and 3.2% on year. Dolat Capital expects the company's revenue in constant currency to grow 1% sequentially, led by the ramping up of prior deals. Prabhudas Lilladher Pvt. Ltd. expects TCS to report only 0.4% sequential growth in revenue in constant currency because of the impact of the war in West Asia and slower ramping up of deals.

 

In dollar terms, the company's revenue is seen rising 0.4% sequentially to $7.66 billion, according to the average of estimates from 10 brokerages. "We estimate flat QoQ (quarter-on-quarter) USD (dollar) revenue growth, constrained by macro headwinds, AI-driven cost pressure, and slower-than-expected pick-up in H2 (Oct-Mar), Choice Institutional Equities said. "This is anticipated to be partly offset by steady execution in BFSI (banking, financial services, and insurance segment) and steady deal momentum," the brokerage added. In the June quarter, the company's dollar revenue had remained flat on quarter at $7.62 billion.
 

The Tata group-owned company's total contract value for the September quarter is expected to be between $8 billion and $10 billion, according to four estimates. Major deals announced by the company during the quarter include a network operations transformation deal with ABB, a strategic five-year deal including the acquisition of Porsche AG's subsidiary MHP Management-und IT-Beratung GmbH, and a deal for AI-led engineering services from Jaguar Land Rover. In the trailing quarter, the company had reported a total contract value of $9.5 billion.

 

The company's earnings before interest and tax margin, or operating margin, for the September quarter, is expected to be 23.7-25.0%, according to estimates from 10 brokerages. In the June quarter, TCS had reported an operating margin of 24%. Most analysts expect TCS to report an improvement in its EBIT margin for the quarter, because of the absence of wage hikes and improved operational efficiencies. Some, however, expect the margin to remain flat or decline slightly, because of higher AI-led investments and foreign exchange fluctuations. 

 

The industry leader will announce its September quarter earnings Thursday. Market participants will focus on the management's commentary on the growth outlook across segments and geographies. They will also keep an eye out for details on the scaling of Al projects and Al-led productivity benefits, including the pace of Al revenue conversion, impact on pricing and margins, and evolution of the company's data-centre business.

 

Management comments on hiring plans amid progress in AI will also be monitored. Updates on the company's inorganic growth priorities, shares of AI services revenue, and discretionary spending environment will also be keenly watched, according to brokerages.

For the quarter ended June, the company's consolidated net profit fell 2.7% sequentially but rose 4.6% on year to INR 133.49 billion. Its bottom line for the quarter was dragged down partly by a one-time charge of INR 6.68 billion associated with the settlement of a legal claim. Adjusting for this, the company's net profit was INR 140.17 billion.

 

Its consolidated revenue for the June quarter rose 2.2% sequentially and almost 14% on year to INR 722.75 billion. In a conference call with analysts following the earnings announcement, Chief Executive Officer and Managing Director K. Krithivasan had said he was anticipating a recovery in the life sciences and healthcare segment in the September quarter and was positive on improvement in revenue contribution from the manufacturing segment. 

 

Tuesday, shares of TCS ended at INR 2,100 on the National Stock Exchange, down 0.7% from Monday's close. The stock has gained 1.5% since the company reported its June quarter earnings. However, it is down over 54% from its all-time high of INR 4,592.25, hit on Aug. 30, 2024.

 

Of the 20 research reports on TCS available with Informist, 16 have a "buy" or equivalent recommendation, two have a "hold" call, and two have a "sell" or equivalent recommendation. The average target price of the "buy" recommendations is INR 2,925, an upside of nearly 40% from Tuesday's close.

 

Following are the Jul-Sept earnings estimates, in INR billion, for Tata Consultancy Services from 11 brokerages in descending order of the net profit estimate:

 

Brokerage	Net Sales	Net Profit	Revenue ($ mln)	EBIT margin %
Motilal Oswal Financial Services Ltd.	732.00	144.40	7.66	25
Prabhudas Lilladher Pvt. Ltd.	731.10	140.30	7.65	24.4
Dolat Capital Market Pvt. Ltd.	734.28	138.87	7.69	24.4
Emkay Global Financial Services Ltd.	732.50	137.52
Nuvama Wealth Management Ltd.	731.73	137.23	7.66	24.2
JM Financial Institutional Securities Pvt. Ltd.	731.10	137.03	7.65	24.1
Systematix Shares and Stocks (India) Ltd.	732.97	136.89	7.67	24.1
HDFC Securities Ltd.	730.81	136.39	7.65	24.5
Nirmal Bang Equities Pvt. Ltd.	725.18	135.93	7.65	24.51
Choice Equity Broking Pvt. Ltd.	728.29	135.12	7.63	24.1
Anand Rathi Share and Stock Brokers Ltd.	729.02	133.75	7.65	23.7
Average	730.82	137.58	7.66	--

 

End

 

US$1 = INR 96.4200

 

Edited by Rajeev Pai

 

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