TCS braces for muted June quarter earnings; AI outlook and deal pipeline in focus

ET Intelligence Group: Tata Consultancy Services (TCS) is expected to report deceleration in revenue and profit growth for the June 2026 quarter amid delays in project ramp-ups as decision cycles of clients elongate. According to the average of the estimates by ETIG and six brokerages, the top line is likely to remain flat sequentially at around $7,620 million for the country's largest software exporter, making it the seventh consecutive quarter of under 2% growth. Revenue had grown by 1.5% in the previous quarter. The company will declare financial numbers on Thursday after market hours.

"We forecast flattish revenue for the quarter, reflecting macro headwinds, productivity pass-through in renewed mega-deals and rising AI-led cost reduction expectations from clients," said Kotak Securities in a preview report.

"Volatile macro conditions are likely to keep clients cautious regarding spending on discretionary new initiatives, which are required for meaningful scale up on AI adoption and producing required return on investment," mentioned Equirus Securities in a sector preview report.

The broking firm expects top IT companies to report either a 1.7% decline or 1.1% increase on a sequential basis in the June quarter.

The rupee denominated financials may find some respite due to favourable rupee-dollar movement. The average rupee rate was 3.4% lower sequentially in the June quarter. A weaker home currency improves realisations of exporters, which comes in handy at a time when the revenue growth is muted. In rupee terms, revenue of TCS may grow by 2.1% to ₹72,202 crore while net profit may drop by 1.9% to ₹13,454 crore.

"The translation of rupee depreciation into net profit may not be immediate for many companies due to cash-flow hedging," said Kotak Securities.

TCS is expected to report a 140-160 basis point sequential drop in the operating margin (EBIT margin) following salary revisions. It had clocked a margin of 25.3% in the previous quarter.

Despite slower decision making by clients, the company is likely to report $8-10 billion worth of new contracts, in line with the trend over the past few quarters. In the March 2026 quarter, it had clocked $12 billion worth of orders.

Investors will track the company's initiatives in artificial intelligence (AI) and the trend in project ramp-ups. "Commentary on demand environment, integration synergies, AI revenue traction, and deal scalability will be closely watched," stated Motilal Oswal Financial Services in a report. The broker expects the company's AI-led services momentum and recent acquisitions of Coastal Cloud and ListEngage to support medium-term growth.