TCS Q3FY22 Earnings Preview: IT major may report strong growth sequentially; margins likely to be stable

The information and technology major Tata Consultancy Services (TCS) is scheduled to release third quarter earnings for the financial year 2021-22 (Q3FY22) on January 12, 2021, Wednesday. The company will also be considering share buyback proposal.

Majority of the analysts and brokerage houses expect that the company to report marginal growth in the top and bottom line during the October-December quarterly results. The major focus would be on deal wins, management commentary, guidance and margin outlook. 

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In this regard, the market analyst and research head at CapitalVia Global Research Ltd, Gaurav Garg said, “TCS has consistently seen growth in terms of earnings and revenue growth. It has experienced a lot of traction in recent months with large deal wins and a favorable currency movement.”

“With the epidemic still raging, the analyst expects to see good results in third quarter with the constant growth expectation of 15 per cent quarter-on-quarter (QoQ).

The IT heavyweight had reported consolidated net profit of Rs 8,701 crore and revenue of Rs 42,015 crore during Q3FY21. While in the previous quarter, PAT (profit after tax) came at Rs 9,624 crore.

Expecting a stable margin in the third quarter, the global brokerage Jefferies sees revenue growth of 3 per cent QoQ in constant currency (CC), on the back of strong demand and deal ramp ups. The cost efficiencies and currency benefits absorbing higher supply side costs likely to aid margins in Q3.

While domestic brokerage house Motilal Oswal expects stable deal wins in the third quarter versus the earlier quarter, similarly, see sequential expansion in margin by 4 basis points to 26 per cent.  The brokerage house estimates marginal jump in the profit and revenue of the company QoQ basis.

The stock has gained momentum since the announcement of the share buyback on Friday. The scrip surged over 3 per cent to hit a new 52-week high on Monday to Rs 3979 per share on the BSE, while on Tuesday it closed almost 1 per cent higher to Rs 3915.8 apiece on the BSE.