Tata Consultancy Services (TCS), India's largest IT services company, is anticipating a challenging start to the fiscal year 2026, with projections pointing to a decline in revenue for the first quarter.

Revenue Outlook

TCS is forecasting a 1.40% sequential decline in constant currency revenue growth for Q1 FY2026. This downturn is primarily attributed to the ramp-down of its deal with Bharat Sanchar Nigam Limited (BSNL), India's state-owned telecommunications company.

Despite the expected decline in constant currency terms, the company's US dollar revenue is projected to see a modest increase. Analysts estimate a 0.60% quarter-on-quarter rise to $7,513.00 million, buoyed by favorable currency movements.

Rupee Revenue and Profitability

In rupee terms, TCS's revenue is expected to experience a slight dip of 0.40% to ₹64,206.00 crore. The company's profitability metrics are also under pressure, with net profit projected to decrease by 0.80% sequentially to ₹12,127.00 crore.

However, it's not all gloomy for TCS. The company's EBIT (Earnings Before Interest and Taxes) margin is estimated to hold steady at 24.30%, showcasing its ability to maintain operational efficiency despite challenging market conditions.

Key Focus Areas

As TCS navigates through these headwinds, several key areas will be under scrutiny:

1. International Business Growth: With the domestic BSNL deal ramping down, TCS's performance in international markets will be crucial for offsetting the impact.

2. FY2026 Outlook: Investors and analysts will be keen to understand the company's projections and strategies for the entire fiscal year 2026.

3. BSNL Deal Impact: The extent of the BSNL deal ramp-down and its ongoing effects on TCS's revenue will be a significant point of discussion.

4. Wage Hikes: Any plans for salary increases and their potential impact on the company's margins will be of interest.

5. GenAI Adoption: TCS's progress in integrating and leveraging Generative AI technologies could provide insights into future growth opportunities.

As the IT services landscape continues to evolve, TCS's ability to navigate these challenges while capitalizing on emerging technologies will be crucial in maintaining its market leadership position. The upcoming Q1 FY2026 results will provide valuable insights into the company's resilience and strategic direction in the face of these headwinds.

Tata Consultancy Services (TCS), India's leading IT services company, has been identified by Systematix as the top IT stock pick ahead of Q1 results. The company has also set the date for its first quarter financial results announcement for the fiscal year 2026. TCS will reveal its Q1 FY26 performance on July 10, 2025, accompanied by considerations for an interim dividend.

Key Highlights

• Systematix Recommendation: TCS named as top IT stock pick before Q1 results
• Industry Outlook: Large-cap IT firms expected to show USD revenue growth between -1.40% to +2.50% QoQ
• Results Announcement: TCS will declare its Q1 FY26 results on July 10, 2025
• Dividend Consideration: The board will consider an interim dividend during the meeting
• Trading Window: Closed since June 23, 2025, in compliance with insider trading regulations
• Earnings Call: Scheduled for 7:00 PM on the day of results announcement
• Press Conference: Set for 5:30 PM on the same day

Industry Expectations

Systematix's analysis suggests that large-cap IT firms are expected to demonstrate USD revenue growth ranging from -1.40% to +2.50% quarter-on-quarter. Infosys is anticipated to lead the pack due to deal ramp-ups. However, margin gains may be limited by low utilization and lack of operating leverage across the sector.

Investor Communication

TCS continues to maintain transparent communication with its stakeholders. The company has planned a comprehensive schedule to disseminate its quarterly results:

1. The press conference at 5:30 PM will provide initial insights into the company's performance.
2. Following this, the earnings call at 7:00 PM will offer a more detailed discussion of the results, likely including a question and answer session with analysts and investors.

Trading Window Closure

In line with regulatory requirements and to ensure fair trading practices, TCS closed its trading window for designated persons on June 23, 2025. This precautionary measure helps prevent insider trading and maintains market integrity during the sensitive period leading up to the results announcement.

Dividend Considerations

The announcement that the board will consider an interim dividend adds an element of interest for shareholders. While the declaration of a dividend is not guaranteed, it signals the company's ongoing commitment to delivering value to its investors.

Investors and market analysts will be keenly watching TCS's Q1 FY26 results, as they often serve as a bellwether for the Indian IT sector's performance. The upcoming announcement will provide valuable insights into the company's start for the fiscal year 2026 and may offer indications about the broader industry trends.

As always, stakeholders are advised to await the official announcement and carefully review the detailed financial results before making any investment decisions.