TCS Q2 results today: IT major expected to report revenue growth of approx 3.5% QoQ

TCS Q2 results: India's largest software services firm Tata Consultancy Services (TCS) on Monday, October 10 will release the July-September quarter (Q2FY23) results.

TCS Q2 FY23 results Preview

The IT major is expected to report a revenue growth of approximately 3.5% QoQ on CC basis, backed by strong order inflow of the last 12 months  

"For 2QFY23, we think that margins will expand by 80bps QoQ, driven largely by reduced operational slack, automation, INR depreciation vs USD and growth," says Nirmal Bang.  

It expects hiring slowdown to continue, while attrition to remain elevated in 2QFY23.  
 

Indian IT services companies are expected to log steady sequential revenue growth in September quarter, but an overhang of weak global cues tinged with macro risks will put a spotlight on management commentary around deal momentum and demand outlook, say analysts.

Brokerage reports and analysts' notes on Q2 earnings preview anticipate reasonably strong growth quarter for Indian IT firms despite challenging macroeconomic scenario in the US and Europe, but there are fair bit of warnings around "incremental pockets of weakness" or "slowdown in coming quarters". The sunny, all-bullish demand narrative just a few quarters back has made way for more cautious and tempered expectations as storm clouds over the global economy prompt economic commentators to flash warnings about recession risks and international market shocks.

Reports suggest that the US-based companies, including many tech firms, have cumulatively laid off thousands of employees in 2022 alone, and slammed brakes on hirings. Back home, market watchers are divided in their opinion on whether the cost optimisation agendas of the US and European companies will continue to yield significant outsourcing gains in favour of Indian service providers in coming quarters, enough to offset any slowdown or pause in discretionary IT spends by clients under duress.

Tech industry veteran and former director of Infosys, Mohandas Pai asserts that the Indian IT sector is in a "sweet spot". The demand outlook is slightly lower than the last quarter due to global uncertainty, but remains "fairly strong", he says. "We are seeing many companies in the US lay off people, which means they are trying to cut costs...If they are trying to cut costs they will outsource more. Indian IT is in a sweet spot because if the market grows, the demand for them grows and if the market falters, people cut costs and outsource more, although there will be a lag of 2-3 quarters before they see results," Pai said.

IT behemoth Tata Consultancy Services (TCS) Q2FY23 earnings will be closely followed by HCL Technolgies on October 12 and the second largest domestic IT firm in terms of revenues, Infosys, will present it’s the results for the quarter ended September on October 13. Besides, Wipro Q2FY23 results will also be announced on October 12.  

Brokerage firm Nirmal Bang expects the revenue growth of IT majors to grow by 3.5-4.5% on a quarter-on-quarter (QoQ) basis amid underperformance by the Nifty IT index.  Ahead of the results, TCS shares were trading flat at 10:30 AM. The sock quoted a price of Rs 3,079 apiece on the NSE after gaining 0.55 per cent. The stock has declined more than 5 per cent in past 1 month and nearly 20 per cent year-to-date.