On the back of a 7-8% increase in revenue, Tata Consultancy Services Ltd. (TCS) is expected to publish a 6-11% YoY gain in net profit for the September quarter. The margin is probably going to remain flat sequentially. The transaction pipeline, pricing situation, growth and margin forecast, and interim dividend, if any, will be the focus of attention. Observe the following five crucial points:

Deal Wins for TCS

For the September quarter, Axis Securities projects that the biggest IT major will post transaction wins between $9 and $11 billion. According to HDFC Securities, the TCS deal patterns for Q2 and Q3 are crucial to mitigating the impact of BSNL in FY26 in the absence of megadeals.

EBITDA Margin

According to Axis Securities, pay increases throughout the quarter would probably cause margin to sequentially decrease by 43 basis points. The main margin challenges that will cause a flat margin are slower growth in the developed market and BSNL's weaker profit profile, according to JM Financial. Sharekhan estimates that Q2 EBIT margin will be 24.9% on a year-over-year basis, which is 65 basis points higher than Q2's 24.3% margin from the previous quarter.

Growth in revenue

According to HDFC Institutional Equities, despite recent wins like Primark, Rolls Royce, and Mansfield Building, TCS's revenue growth may decrease in Q2. This is due to subdued performance ex-India with incremental deterioration in Retail & CPG (for example, CVS Health) and growth deceleration in the UK area. 

Nirmal Bang anticipates TCS to post sales of Rs 64,389 crore on a year-over-year basis, up 7.9%. This would surpass Infosys's projected 5.1% Q2 sales increase, Tech Mahindra's 3.3%, Wipro's negative 0.3%, and LTIMindtree's 6.6% Q2 sales growth. It would, however, fall short of HCL Tech's projected YoY sales increase of 8.2%.

"We expect CC revenue growth of 0.9 per cent with 80 bps cross currency tailwind translating into 1.6 per cent QoQ dollar revenue growth," stated JM Financial.

Growth in profits

In terms of earnings, Nirmal Bang anticipates that TCS would record an 11% YoY increase in profit at Rs 12,591 crore, which would be less than Tech Mahindra's projected 23% growth but greater than Infosys' (10.8%), HCL Tech's (9%), Wipro's (10.3%), and LTIMindtree's (1%). According to Sharekhan, TCS's earnings increased by 9% year over year to Rs 11,342 crore.

Management analysis

Analysts stated that they will be closely monitoring the demand outlook in the US BFSI, any signs of deteriorating demand in the continental EU/UK, commentary on deal ramp-ups, client decisio-making, and furloughs, as well as an update on the BSNL deal ramp and incremental contribution thereof. It is unclear if TCS will hold a conference call today in the wake of Ratan Tata's passing.

Investors would also consider the entire pipeline of agreements, notable hires, and any impact on margin from significant efficiency deals.