TCS Q2 results preview: Net profit likely to rise up to 4%; new deal wins and management outlook in focus

According to experts, the IT behemoth is expected to report revenue in the range of ₹63,938 to ₹64,172 crore for the September quarter of FY25. Revenue growth could be around 1.3% to 2.1% quarter-on-quarter and 6-7% on a yearly basis.

Experts predict the company’s net profit will rise around 3-4% quarter-on-quarter and 9-10% year-on-year (YoY) to ₹12,000 to ₹12,450 crore. The IT major's EBIT margins are expected to remain in the range of 24.2% to 25.1%.

TCS started FY25 on a high note

TCS started the new fiscal year FY25 on a high note by posting a 5.4% YoY growth in revenue at ₹62,613 crore for the June quarter despite headwinds and high interest rates in the key US market. Its net profit rose by 8.8% YoY to ₹12,105 crore even as several businesses reported degrowth. Operating margins improved by 150 basis points to 24.7%.

In the July-September quarter of FY24, TCS reported consolidated revenues of ₹59,692 crore. Its profit was ₹11,380 crore in the second quarter of last fiscal.

Revenue growth and margins

Investors’ focus will be on TCS's revenue growth, which could give a glimpse into what is coming from other IT players in this earnings season. Experts have projected single-digit growth in revenue for TCS while margins are expected to remain flat. The BSNL deal is likely to aid revenue growth in the second quarter. Margins are expected to remain under pressure due to investment in training and talent development.

Management commentary

Investors will watch management commentary about the current situation in its key markets, such as the US and the UK. When announcing the June quarter's financial results, company management stated that this fiscal year was likely to be better than FY24 but maintained that growth trends or green shoots were still too early.

The company’s view on demand recovery and generative AI pipeline will also remain in focus, especially against the backdrop of rival Accenture, which is posting a robust rise in revenue from Gen AI projects.

Deals pipeline

Amid some challenges faced in the key UK market, D-Street will keep an eye on the company's deals pipeline. While the ongoing BSNL deal could boost revenue in the current quarter, its new deals will also be under the radar of the investors.

Client acquisitions

Investors will watch the company's large client additions in the second quarter of FY25. In the first quarter, TCS added 3 more entities YoY in the $100 million-plus band, bringing the total number of clients to 63.

It added 3 more clients in the $50 million-plus band and 4 more clients in the $20 million-plus band.

Attrition and hiring

The company’s attrition levels and hiring plans will also be in focus. In the previous quarter, the company asserted that it would honour all the job offers it had made but remained focused on utilising the capacity it had already built up. Its last twelve months (LTM) attrition in IT services fell to 12.1% in Q1F25.

TCS shares maintain momentum ahead of results

TCS shares have been trading in positive territory ahead of its Q2 results. The IT stock opened higher on Thursday ahead of the result announcement. At 9:20 a.m., the stock traded at ₹4,268 per share, up 0.46% on the NSE.