TCS Q2 Results Preview: EBIT Margins Likely To Expand, 2nd Interim Dividend Ahead; Key Factors To Expect

Tata Group-backed technology giant, Tata Consultancy Services (TCS) is likely to witness tailwinds in its constant currency revenue growth to between 0.9% to 1.7%, in the second quarter of FY25. While the behemoth's EBIT is expected to expand further. TCS is going to announce its Q2FY25 results on October 10, kickstarting the latest earning season. Apart from the earnings report, TCS will also announce its second interim dividend.

Ahead of its Q2 results, TCS share price ended flat at Rs 4252.30 apiece on BSE, after market hours of October 9, with an m-cap of Rs 15,38,519.36 crore. YTD, the stock is up by 11.6% on BSE so far.

TCS Q2 Results Preview:

Analysts at Motilal Oswal expect TCS to report 5.9% YoY revenue growth in Q2FY25, while its CC revenue growth is likely to be robust at 1% growth sequentially.

Meanwhile, Phillip Capital expects TCS to report +1.7% QoQ CC revenue growth helped by a) BSNL Deal ramp-up (

Brokerage Sharekhan too expects TCS to post revenue growth of 1% in CC terms with ~70 bps cross-currency tailwinds leading to 1.7% reported growth. Revenue to be aided by BSNL deal ramp-up. It further expects EBIT margins of the company to expand by ~25 bps q-o-q after the wage hike impact taken in Q1.

Along similar lines, Nirmal Bang expects the margin to expand by 10bps due to rupee depreciation partly offset by large deal ramp-up, lower utilisation and investment in talent. While it anticipates a 1.1% CC revenue growth in Q2FY25. This is led by deal scale-up, including the BSNL deal and incremental growth pick-up in BFSI and healthcare vertical.

On the other hand, in its preview note, Emkay Global said, "We build in a 2.2% QoQ USD revenue growth after factoring in 100bps cross-currency tailwinds. We are building an incremental 0.8% QoQ contribution from the BSNL deal. EBIT margin is likely to remain flattish QoQ due to adverse revenue mix with BSNL driving the bulk of incremental revenue and muted growth in the international market."

Key things to watch out for i) Anticipated impact of furloughs in Q3 and the possibility of growth uptick and discretionary spending recovery in H2, ii) demand trends in key verticals like BFSI, Retail, Hi-Tech, Manufacturing, and Communications, iii) deal intake and deal pipeline (including AI and Gen AI), iv) pricing environment considering macro uncertainties and a deal mix shift toward cost takeouts, v) margin outlook, vi) Management commentary on-demand environment across geographies, vii) hiring plan including freshers, as per Emkay.

That being said, TCS revenue is expected to be at Rs 64,275.5 crore in Q2FY25, up by 7.7% YoY and 2.7% QoQ. While PAT is seen at Rs 12,461.9 crore, registering growth of 9.9% YoY and 3.5% QoQ, by Emkay.

TCS Interim Dividend:

TCS has announced that in the board meeting on October 10, the board will consider the declaration of a second interim dividend to the equity shareholders. The company has fixed October 18, as the record date to determine eligible shareholders for the upcoming dividend.

For FY25, earlier, TCS delivered the first interim dividend of 1,000% worth Rs 10 per share. Overall, in FY24, the company paid up to a 7,300% dividend valuing Rs 73 per share.

Currently, dividend yield is at 1.72%.

On the stock price, Sharekhan has recommended BUY for a target price of Rs 5,230 apiece. While HDFC Securities suggested to ADD for a target price of Rs 4,670. Phillip Capital also advised to BUY for Rs 4,870 target.

TCS Q1 Results:

In the June 2024 quarter, TCS surpassed estimates with a consolidated net profit of Rs 12,105 crore, registering a growth of 8.86% from a net profit of Rs 11,120 crore in the same quarter a year ago. TCS' consolidated net profit dipped by 3.2% in Q1FY25 compared to PAT of Rs 12,502 crore in Q4FY24.

In the top-line front, in Q1, consolidated revenue from operations stood at Rs 62,613 crore, recording a growth of 5.44% from revenue of Rs 59,381 crore in Q1FY24, and was also up by 2.5% from revenue of Rs 61,237 crore in Q4FY24. In constant currency, the company's revenue growth came in at 4.4% YoY.