TCS Q1FY24 earnings preview: IT major is likely to see muted revenue growth on project delays; EBIT margin may contract

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Tata Consultancy Services (TCS), the largest software services exporter in India, will announce its earnings for the first quarter of FY24 on July 12. The company will also declare an interim dividend along with the results.

The IT major is expected to see a dull quarter, in line with the weak sector performance which was impacted by a slower deal pipeline conversion leading to an impact on volumes in a seasonally strong quarter.  During Q1FY24, full quarter wage hike impact and lower utilisation due to project cancellations and postponements are likely to weigh on margins of TCS. Meanwhile TCV is likely to be flattish after the deal with BSNL.

The uncertainty over demand seen in the month of March has continued in the June 2023 quarter for TCS and the company is seeing some project cancellations and postponements. Some right-shifted projects have started ramping up in June.

Europe and the UK are growing well while there is more weakness in North America, analysts said. Also Read: Demand slowdown to weigh on IT services firms’ Q1 show According to Emkay Global Financial Services, TCS may see 1.3% QoQ USD revenue growth factoring 30 bps cross-currency tailwinds.  The brokerage house expects the company’s EBIT margin to decline by 100 bps QoQ due to wage hike, partly negated by operating efficiencies, employee pyramid rationalization, and cross-currency tailwinds.  Analysts at Motilal Oswal expect TCS to see muted revenue growth on account of project cancellations and delays, while EBIT margin is expected to decline 140 bps, on account of wage hikes and weak revenue growth.  According to Motilal Oswal, TCS June quarter revenue may rise 0.7% QoQ to $7,246 million.