TCS Likely to See Modest Q4 Growth as Discretionary Spending Remains Soft
Tata Consultancy Services (TCS) is expected to deliver muted earnings for the fourth quarter of FY25, with seasonal headwinds, ongoing global macroeconomic pressures, and project delays impacting performance. The company will release its results on April 10, and according to a Moneycontrol poll of four brokerages, the Street anticipates only a modest 5 percent year-on-year growth in revenue to ₹64,840 crore, while net profit is likely to increase by a marginal 1.4 percent to ₹12,554 crore.
These projections reflect a challenging operating environment, where global enterprises continue to prioritise cost containment and delay discretionary tech projects due to uncertainty stemming from tariff-related disruptions, weak US GDP projections, and a slowdown in sectors like retail and manufacturing. The impact of fewer billing days in Q4, coupled with a decline in BSNL-related revenue, is also likely to weigh on sequential growth.
Revenue expected at ₹64,840 crore, up 5% YoY
Net profit projected at ₹12,554 crore, up 1.4% YoY
EBITDA likely around ₹17,154 crore
Modest sequential margin improvement of ~30 bps
Seasonality and Telecom Headwinds Weigh on Sequential Growth
In constant currency (CC) terms, brokerages expect sequential revenue to contract, primarily due to the tapering of BSNL-related business and seasonal softness. While BFSI (Banking, Financial Services, and Insurance) may remain a bright spot, sectors such as manufacturing, healthcare, and retail are likely to drag overall growth.
The telecom vertical, particularly the exit or winding down of large public sector engagements like BSNL, is expected to result in a $30 million revenue decline, weighing on the topline in Q4.
BSNL revenue likely down $30 million QoQ
BFSI vertical to offset some drag from other segments
Retail, healthcare, and manufacturing seen as weak performers
Margins Constrained by Talent Investments and Flat Realisations
Despite the benefits of rupee depreciation, TCS is unlikely to post a major improvement in margins. Analysts forecast a limited 30 basis point quarter-on-quarter expansion, held back by elevated talent costs, including investments in reskilling, employee promotions, and retention efforts.
These cost pressures continue to absorb gains from operational efficiencies, even as demand for traditional outsourcing services remains stable.
Margin improvement capped at 30 bps QoQ
Re-skilling, promotions offsetting rupee tailwinds
Limited upside from pricing changes or automation benefits
Deal Flow Steady, But Large Contracts Remain Elusive
The total contract value (TCV) for Q4 is expected to remain between $10 billion and $11 billion, consistent with the previous few quarters. However, analysts caution that closure of large deals has slowed, as clients remain cautious on long-term commitments amid volatile economic signals.
There’s continued focus on cost optimisation, legacy transformation, and non-discretionary digital projects, but spending on newer initiatives—especially in digital transformation and GenAI—remains uneven and experimental.
Deal wins likely in the $10–11 billion range
Fewer large deal closures amid macro uncertainty
Clients favour cost optimisation over transformational spends
Focus Areas for Investors and Analysts
Heading into the earnings release, investor attention will be squarely focused on CY25 client budget visibility, any improvements in discretionary spending, and signs of stabilisation in international markets, particularly North America and Europe.
Analysts will also track commentary on pricing trends, impact of GenAI-led automation on deal volume, and revenue recovery in non-BFSI sectors. Updates on attrition, hiring trends, and offshore mix will also provide cues on future margin performance.
CY25 client budgets and pricing discipline
Discretionary spend outlook across verticals
GenAI impact on revenue growth and project volumes
Recovery signs in Europe and North America
Employee pyramid, attrition, and utilisation metrics
Q4 Seen as Transitional; FY26 Outlook More Critical
TCS’s Q4 FY25 is widely viewed as a transitional quarter, reflecting seasonal weakness and broader IT sector headwinds. However, the forward commentary and FY26 guidance will likely set the tone for both the company’s performance and sentiment in the IT services space, especially amid global growth jitters.
Investors will look for signals of a pickup in client spending, especially in discretionary IT budgets, and whether GenAI-related demand will begin to convert into meaningful revenue streams in the next two to three quarters.
