Preview of TCS Q3 Results: Net profit increased 3% QoQ, but revenue growth may be hampered by furloughs; margins are expected to increase.

TCS Q3 Results Preview: Compared to ₹11,909 crore in the September quarter, the IT major's net profit is anticipated to increase by 3.26% to ₹12,298 crore in Q3FY25. TCS's Q3 margin expansion is probably driven by operational efficiency and lower revenues from the low-margin BSNL deal.

On January 9, the biggest provider of IT services in India, Tata Consultancy Services (TCS), will release its financial results for the third quarter of FY25, beginning the Q3 earnings season. Furloughs hinder growth, making the October–December quarter a seasonally bad time for IT services firms. Nonetheless, there are indications that the first stage of the recovery shown in H1FY25 is accelerating, and the outlook for technology spending is anticipated to improve in CY25.

It is anticipated that TCS would release its Q3 2025 results after market hours on Thursday. In the meantime, TCS's stock price dropped more than 4% in the December quarter.

Furloughs continue to have an impact on revenue, hence TCS Q3 growth is anticipated to be muted. Analysts anticipate, however, that client-specific difficulties will subside throughout the quarter. Additionally, TCS may expect a margin expansion as a result of a slowdown in BSNL deal-related expenses that affected Q2 margins, given the salary raise that was already announced in Q1FY25.

Here is a sneak peek at TCS's 2024 Q3 results:

TCS Q3 Revenue TCS is expected to report ₹64,190 crore in revenue for the quarter that ended in December 2024, which represents a slight decline of 0.11% from ₹64,259 crore in the prior quarter.Based on the average forecasts of five brokerages surveyed by Livemint, revenue in USD terms is predicted to drop 0.72% to $7,615 million from $7,670 million, quarter-on-quarter (QoQ), in Q3FY25.

Due to decreased BSNL income and furloughs, TCS is expected to generate 0.1% QoQ Constant Currency (CC) revenue increase and a -0.8% QoQ USD decline. This is expected to be partially offset by a reversal of last quarter's exceptional items, according to brokerage company Nuvama Institutional Equities.

The TCS deal pipeline is probably going to stay strong. Though manufacturing needs to be watched and the UK and Europe are poor, analysts think BFSI is moving in a positive direction.

Q3 Profit for TCS

In Q3FY25, the IT major's net profit is anticipated to increase by 3.26% to ₹12,298 crore from ₹11,909 crore in the September quarter. Given that TCS reported a net profit of ₹11,058 crore for the December quarter of the previous fiscal year, the company's net profit is anticipated to increase by 11.2% on an annual basis.

EBIT and margins for TCS Q3

According to average estimates, TCS' operational earnings before interest and tax (EBIT) in Q3FY25 are anticipated to increase by 1.16% to ₹15,645 crore from ₹15,465 crore, QoQ. Additionally, the EBIT margin is predicted to increase sequentially by 20 basis points (bps), from 24.1% to 24.3%.

Margin expansion is likely to be driven by operational efficiency, training, talent development, and lower revenues from the low-margin BSNL acquisition.It is also anticipated that TCS Q3 margins will benefit from the Indian rupee's decline vs the US dollar. More than half of TCS's total business is conducted in the US.

What to watch out for?

Key indicators of TCS Q3 results would be the management's statement on the pricing and demand environment as well as the deal pipeline.

The most significant catalyst for the IT industry, according to brokerage firm Motilal Oswal Financial Services, will occur after Q3FY25, when client budgets for CY25 will be established and the extent of the shift in client behavior will become more apparent.

2024 TCS Dividend

Along with the Q3 results, the IT bellwether has also stated that its board will take a dividend into consideration. The announcement of the third interim dividend to equity shareholders will be discussed by the TCS board. The date of the TCS dividend record is set on Friday, January 17, 2025.

In a regulatory filing, TCS stated that the third interim dividend, if declared, would be distributed to the company's equity shareholders whose names were listed as beneficial owners of the shares as of Friday, January 17, 2025, the Record Date set for the purpose, in the Register of Members of the Company or in the Depositories' records.

TCS shares were up 1.60% at ₹4,092.45 per on the BSE at 2:55 PM.