TCS Q3 Earnings Preview: Furloughs, lower BSNL contribution to drag growth

Tata Consultancy Services (TCS) Ltd., the Tata Group giant will kickstart the Nifty 50 earnings season for the December quarter on Thursday, December 9.

TCS is likely to report a 0.2% growth in constant currency terms, which is likely to be lower than the September quarter, as well as the same quarter last year. The growth is likely to be slower due to the lower contribution of the BSNL deal and furloughs.

The BSNL contract will start ramping down from March 2025 onwards with a significant revenue drawdown seen in the June 2025 quarter.

In US Dollar terms, TCS' revenue will likely decline by 0.6% on a sequential basis, while its margin may expand by 40 basis points.

TCS' net profit and EBIT, both may see a low-single-digit growth on a sequential basis.

What to watch for in TCS Earnings:

What will be the company's growth in the quarter excluding the BSNL deal?
revenue for the company may fall 0.4%, which may be the weakest since the pandemic.
Analysts are estimating a revenue growth of nearly 5% for the full financial year of which more than half or 2.7% to 2.8% is likely to be driven by the BSNL deal. This means organic growth is seen at close to 2%.
What also needs to be watch out for is whether the 8% growth target is aggressive for financial year 2026 as the BSNL contract unwinds.
Management commentary on what is driving the revenue growth underperformance compared to the rest of the IT industry, excluding the BSNL revenue

Shares of TCS have underperformed its peers. Over a 12-month period, while the stock has gained 8%, shares of Infosys are up 25% in comparison.

In fact, Infosys is now trading at a premium in comparison to TCS, and also offers more growth in comparison.

CLSA expects Infosys to grow 8.4% in financial year 2026, in comparison to the 6.1% projection for TCS.