TCS Q1 Results Preview: IT major may clock modest 3% profit growth; Trump tariffs impact in focus

Indian IT bellwether Tata Consultancy Services (TCS) will announce its Q1FY26 earnings on Thursday, July 10. The company is expected to report a year-on-year (YoY) net profit growth of 1% to 3%, according to estimates from four brokerages. The bottom line is projected to be in the range of Rs 12,040 crore to Rs 12,416 crore.

Revenue for the April–June quarter of FY26 is expected to grow between 2.7% and 3.8%, i.e., in the range of Rs 62,613 crore to Rs 64,993 crore.

The estimates have been provided by Kotak Institutional Equities, Nuvama Institutional Equities, InCred Equities, and Axis Securities.

Nuvama has given the most conservative estimate for profit after tax (PAT), while InCred remains the most bullish among its peers. In terms of revenue, InCred has projected the highest topline, whereas Axis has given the lowest.

For the largest domestic IT company by market capitalisation (Rs 12.32 lakh crore), revenues from developed markets are expected to face pressure, alongside a ramp-down in BSNL-related revenues.

Margins are likely to decline on a year-on-year basis but improve sequentially.

Among the key monitorables to track are tariff uncertainty, underperformance in developed markets, the outlook on wage hikes, and new deal wins including the BSNL account.

Here’s what the brokerages recommended:

Kotak Institutional Equities

Kotak expects TCS to report a profit after tax (PAT) of Rs 12,351 crore in Q1FY26, marking a 2.6% year-on-year (YoY) increase and a 1% rise sequentially. Net sales are pegged at Rs 64,993 crore, reflecting a growth of 3.8% YoY and 0.8% quarter-on-quarter (QoQ).

Operating performance is also expected to remain healthy, with EBITDA estimated at Rs 17,257 crore, up 3.6% YoY and 1.6% QoQ. The EBITDA margin for the quarter is projected at 26.6%, down 6 basis points YoY but improving by 21 basis points sequentially, indicating stable operational efficiency.

"We forecast a 0.4% decline in constant currency (c/c) revenue, entirely led by a decline in BSNL revenues. We estimate BSNL-related revenue at US$157 million, down US$57 million or 75 bps QoQ. Revenue growth in developed markets is forecast at 0.3%," Kotak said in a note.

The brokerage expects EBIT margins to decline on a YoY basis, despite the deferral of wage hikes usually implemented in April. The margin pressure stems from a lack of operating leverage. Even with currency tailwinds, EBIT margins are likely to remain flat sequentially.

Deal wins are expected to remain steady at US$8–9 billion, flat on a YoY basis.

Key things to watch, according to Kotak Equities:

- Reasons behind growth struggles in international markets despite robust deal wins—client ramp-downs likely being a factor.
- The impact of tariff uncertainty on demand across verticals, particularly manufacturing and retail.
- Updates on the financial services and healthcare verticals.
- Any share loss to insourcing by large clients.

Nuvama Institutional Equities

According to Nuvama’s Q1FY26 earnings preview, PAT is projected at Rs 12,040 crore, indicating a 1.5% YoY growth, but a slight 0.1% decline on a sequential basis. Revenues for the quarter are estimated at Rs 62,613 crore, reflecting a 3.2% YoY increase and a modest 0.2% QoQ rise.

EBIT is forecast at Rs 15,442 crore, up 2% YoY and 1% QoQ. The EBIT margin is expected to settle at 24.7%, a contraction of 30 basis points YoY, but an improvement of 20 basis points sequentially.

Nuvama expects TCS to report a 1% QoQ constant currency (CC) revenue decline and a 1.1% dollar revenue decline, primarily due to the ramp-down in the BSNL project and modest growth in developed markets, with continued weakness in retail and manufacturing. However, BFSI is expected to remain a growth driver.

“We will watch out for the outlook on the US macro environment amid tariff uncertainty and commentary on margin recovery,” the brokerage said.

InCred Equities

InCred estimates PAT at Rs 12,416 crore for Q1FY26, a 3.1% YoY increase and a 1.6% QoQ rise. Revenues are projected at Rs 64,959 crore, up 3.7% YoY and 0.7% sequentially.

EBIT is expected to be Rs 15,850 crore, representing a 2.6% YoY and 1.6% QoQ growth. EBIT margin is forecast at 24.4%, down 26 basis points YoY, but up 20 basis points sequentially.

InCred highlighted that revenue in constant currency terms may decline due to the BSNL impact, while developed markets are expected to show modest sequential growth.

“Revenue softness and business reinvestments, including strengthening of the partnership ecosystem, as well as INR appreciation on a QoQ basis, are key margin headwinds,” the note said.

Key monitorables include deal pipeline conversion, outlook across the financial services, retail and manufacturing verticals, and updates on large deal ramp-ups.

Axis Securities

Axis Securities projects Q1FY26 PAT at Rs 12,107 crore, registering a modest 0.7% YoY increase. Revenue is estimated at Rs 62,613 crore, implying a 2.7% YoY rise.

EBIT is forecast at Rs 15,444 crore, up 3.3% YoY. EBIT margin is expected to improve by 13 basis points YoY to 24.7%.

“We expect topline growth to remain flattish QoQ due to the decline in revenues from the BSNL deal,” the brokerage said.

Margins are likely to see a sequential improvement of 60 basis points, aided by the absence of wage hikes and cross-currency tailwinds.

Key elements to watch include the deal pipeline, vertical-level commentary, wage hike outlook, and updates on new BSNL-related deal wins.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)