TCS Q3 Results Preview: Net profit seen up 3% QoQ, while furloughs may dent revenue growth; margins likely to expand

Tata Consultancy Services (TCS), the largest IT services company in India, is set to declare its financial results for the third quarter of FY25 on January 9, kicking off the Q3 earnings season. The October-December quarter is a seasonally weak quarter for IT services companies as furloughs weigh on growth. However, the outlook for technology spending is expected to improve in CY25 and there are signs of an acceleration of the initial phase of recovery seen in H1FY25.

TCS Q3 results 2025 are expected to be announced post-market hours on Thursday. Meanwhile, TCS share price has fallen over 4% during the December quarter.

TCS Q3 growth is expected to be subdued as revenue remains impacted by furloughs. However, analysts expect client-specific challenges to normalize during the quarter. Moreover, with wage hike already given in Q1FY25, TCS may see a margin expansion due to deceleration in BSNL deal-related costs, which hit Q2 margins.

Here’s a preview of TCS Q3 results 2024:

TCS Q3 Revenue

TCS is estimated to report a revenue of ₹64,190 crore during the quarter ended December 2024, registering a marginal fall of 0.11% from ₹64,259 crore in the previous quarter. Revenue in USD terms in Q3FY25 is expected to decline 0.72% to $7,615 million from $7,670 million, quarter-on-quarter (QoQ), according to average estimates of five brokerages polled by Livemint.

Brokerage firm Nuvama Institutional Institutional Equities expects TCS to deliver 0.1% QoQ Constant Currency (CC) revenue growth and -0.8% QoQ USD decline due to lower BSNL revenue and furloughs, likely to be partially offset by a reversal of exceptional items of last quarters.

TCS deal pipeline is likely to remain healthy. Analysts believe there is some good momentum in BFSI, but weakness in UK and Europe and manufacturing needs to be monitored.

TCS Q3 Profit

The net profit of the IT major is expected to grow by 3.26% to ₹12,298 crore in Q3FY25 as against ₹11,909 crore in the September quarter. On a year-on-year basis, TCS net profit is expected to grow by 11.2% as the company posted a net profit of ₹11,058 crore in the December quarter last fiscal year.

TCS Q3 EBIT, Margins

At the operational level, TCS’ earnings before interest and tax (EBIT) in Q3FY25 is expected to rise 1.16% to ₹15,645 crore from ₹15,465 crore, QoQ, as per the average estimates. EBIT margin is also estimated to improve by 20 basis points (bps) to 24.3% from 24.1%, sequentially.

Lower revenues from low-margin BSNL deal, talent development, training, and operational efficiency are likely to drive margin expansion. The depreciation in Indian rupee against the US dollar is also expected to benefit TCS Q3 margins. The US accounts for over 50% of overall business of TCS.

What to watch out for?

The commentary of TCS management on demand and pricing environment and deal pipeline would be key monitorables in TCS Q3 results.

According to brokerage firm Motilal Oswal Financial Services, the most important catalyst for the IT sector now would come after Q3FY25, when client budgets for CY25 would be finalized and the magnitude of change in client behavior would become clearer.

TCS Dividend 2024

The IT bellwether has also announced that its board will consider a dividend along with the Q3 results. TCS board will consider declaration of the third interim dividend to the equity shareholders. TCS dividend record date has been fixed on Friday, January 17, 2025.

“The third interim dividend, if declared, shall be paid to the equity shareholders of the Company whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as on Friday, January 17, 2025 which is the Record Date fixed for the purpose,” TCS said in a regulatory filing.

At 2:55 PM, TCS shares were trading 1.60% higher at ₹4,092.45 apiece on the BSE.

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