Tata Consultancy Services (TCS) is expected to report flattish growth in the third quarter of FY 2024-25 compared to the second quarter, with a 4-5 per cent growth y-o-y, as per analyst reports. Brokerages said the quarterly performance will be affected by furloughs and lower revenues from BSNL. The company will release its Q3 results on Thursday.

JM Financial attributed TCS’ flat growth to BSNL, as BSNL becomes a headwind, and maintained a ‘hold’ rating for the company. The brokerage estimated a $60 million decline in the BSNL deal. Excluding regional markets where BSNL is housed, growth was estimated at +1 per cent q-o-q. Lower revenues from the low-margin BSNL deal, coupled with operational efficiency, are expected to drive a 20 bps margin expansion. The brokerage also estimated a 95 bps cross-currency tailwind, which is expected to result in a -1 per cent q-o-q USD revenue growth. Net profits were projected to grow from ₹11,909 crore to ₹12,178.5 crore, reflecting a 2.3 per cent change q-o-q and a 1.4 per cent change y-o-y. EBIT margin movement is expected at 24.3 per cent.

• Q3 Results Today Live: TCS, Tata Elxsi, TPHQ, IREDA, Padam Cotton Yarns, GTPL Hathway in focus

Nuvama Research estimated TCS to post modest top-line growth of 0.1 per cent revenue growth q-o-q and a -0.8 per cent decline in USD revenue due to lower BSNL revenue and furloughs. The company’s margin is expected to expand around 20 basis points (bps) q-o-q, driven by operating efficiencies. The brokerage expects deal wins to be stable and asked investors to watch out for the outlook on the BSNL deal and margin levels. The brokerage expects PAT to grow from ₹11,909 crore in Q2FY25 to ₹12,390.1 crore in Q3FY25, reflecting a 4 per cent q-o-q and 12 per cent y-o-y growth.

Motilal Oswal expects around 0.4 per cent q-o-q constant currency revenue growth for the company and 5 per cent growth y-o-y. EBIT margins are expected to improve by 40bp q-o-q, largely due to investment in talent development and training, operational efficiency and absence of wage hikes.

Revenue will be impacted by furloughs, but the brokerage said client-specific challenges are likely to normalise in the third quarter. Adjusted PAT is expected to grow to ₹12,730 crore in Q3FY25, reflecting a 6.4 per cent q-o-q growth and 8.1 per cent y-o-y growth, compared to ₹11,770 crore in Q3FY24.

“The deal pipeline should remain healthy. There is some good momentum in BFSI, but weakness in UK/Europe and manufacturing needs to be monitored. Outlook on near-term demand & pricing environment, BFSI, and deal wins are key monitorables. We currently value TCS at 30x (earlier 33x) FY27E EPS, as we believe there is a downside risk to our estimates from the BSNL deal ramp-down in FY26E,” said the brokerage in its report.