TCS expected to show marginal revenue growth in Q1 amid currency fluctuations

ET Intelligence Group: Tata Consultancy Services is expected to report marginally better dollar denominated revenue growth on sequential basis for the June quarter compared with the previous quarter. The country's largest software exporter, which is slated to declare the first quarter numbers on Thursday evening, will likely report a sequential growth in net profit compared with a decline seen in the prior quarter.

According to the average of the estimates by ETIG and 12 brokerages, revenue is expected to increase by 1.2% to $7,554 million compared with a 1% drop in the previous quarter. The revenue performance will be supported by a significant 5-7% drop in the dollar against pound and euro. A weakness in the reporting currency benefits exporters while its strength affects realisations adversely.

In rupee terms, revenue will rise at a slower pace of 0.3% to ₹64,694.5 crore following a 1.2% appreciation in the average rupee rate against the dollar. Net profit may increase by a modest 0.5% to ₹12,294 crore. In the previous quarter, revenue had grown by 0.8% sequentially while net profit fell by 1.3%.

"Increased macro concerns, which started in March 2025, will likely have a full quarter impact in the June quarter despite seasonal strength," mentioned Equirus Capital in a sector preview report. The broking house expects revenue of TCS to contract 0.4% in constant currency terms, affected by an anticipated ramp down in the BSNL project and muted growth in overseas markets.

Operating margin is expected to remain flat or may improve marginally by 20-30 bps given foreign exchange benefits and deferred salary increase. In the previous quarter, the margin fell by 30 bps sequentially to 24.2%. While the company does not provide revenue and profit growth guidance, management commentary on new deals and hiring trends will be crucial. "We would watch for deal pipeline conversion, hiring and offshoring, outlook on operating margin and its sustainability, and trends in Generative AI," said IDBI Capital.