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HomeUncategorizedTCS Prepares for Q4 Earnings: Analysts Eye Key Growth Drivers and Challenges.

TCS Prepares for Q4 Earnings: Analysts Eye Key Growth Drivers and Challenges.

TCS is expected to report Q4 revenue of Rs 60,559 crore, a flat QoQ, and net profit of Rs 11,739 crore, a 6.16% QoQ increase. The company’s management commentary will focus on key themes in the upcoming Q4 results.

Tata Consultancy Services , India’s largest IT services company, has undergone significant changes in recent years, including a new CEO, new verticals like cloud and AI, and becoming AI-first in identity. As markets await Q4 results, TCS’s management commentary will focus on five key themes.

Revenue outlook

Tata Consultancy Services is expected to see revenue growth of 2.36 percent YoY and net profit of Rs 11,739 crores in Q4FY24, with the company leading the growth due to better utilization and lower sub-contracting expenses. EBIT margins are expected to remain flat at 25%, but analysts at Sharekhan expect some improvement due to better utilization and lower sub-contracting expenses.

Demand outlook

Tata Consultancy Services has secured multi-year, multi-million dollar deals from Aviva, Ramboll, and the US Central Bank, indicating a strong order book. Analysts expect a good order book, with mega deals exceeding $500 million. The 15-year Aviva contract could be TCS’ biggest deal ever. TCS moved away from its previous guided range of $9-10 billion in Q3FY24 but managed $8.1 billion in order book without a mega deal. Last quarter, TCS reported a slowdown in its BFSI vertical and North America’s decline in growth. Despite the macro-overhang, the deal TCV over 9MFY24 is robust at $29.5 billion.

Hiring Plans

Tata Consultancy Services headcount dropped by 5,680 in Q4 last year, marking the second consecutive quarter of headcount decline. Despite this, the company is on track to hire 40,000 freshers for FY24. Analysts predict a reversal of furloughs in Q4FY24 will benefit TCS’s business. The company reported a 13.3% attrition rate in Q4 and plans for hiring in FY25, despite delays in campus hiring in Q24.

AI side

Tata Consultancy Services has over 250 generative AI projects in the pipeline, with smaller project sizes expected as customers become more comfortable with the technology. Rival Accenture has been generating more revenue and deals, adding $600 million in generative AI deals in the December-February quarter, in addition to $450 million in previously won deals. TCS’s next phase of generative AI plans will be interesting to watch.

Commentry outlook

Tata Consultancy Services is navigating the AI boom by fortifying its strategy, helping customers find generative AI use cases, and training employees. The company aims to expand business in semiconductors, EVs, and AI. CEO K Krithivasan expects FY25 to be better than FY24, and budgets are no longer sacrosanct as customers are ready to re-calibrate. Analysts at Jefferies expect IT firms to be cautious on FY25 guidance due to missed initial guidance ranges in FY24.

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Tata Consultancy Services has secured multi-year, multi-million dollar deals from Aviva, Ramboll, and the US Central Bank, indicating a strong order book. Analysts expect a good order book, with mega deals exceeding $500 million. The 15-year Aviva contract could be ‘ biggest deal ever. TCS moved away from its previous guided range of $9-10 billion in Q3FY24 but managed $8.1 billion in order book without a mega deal. Last quarter,reported a slowdown in its BFSI vertical and North America’s decline in growth. Despite the macro-overhang, the deal TCV over 9MFY24 is robust at $29.5 billion.

Tata Consultancy Services has secured multi-year, multi-million dollar deals from Aviva, Ramboll, and the US Central Bank, indicating a strong order book. Analysts expect a good order book, with mega deals exceeding $500 million. The 15-year Aviva contract could be biggest deal ever. TCS moved away from its previous guided range of $9-10 billion in Q3FY24 but managed $8.1 billion in order book without a mega deal. Last quarter, company reported a slowdown in its BFSI vertical and North America’s decline in growth. Despite the macro-overhang, the deal TCV over 9MFY24 is robust at $29.5 billion.

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