TCS Q2 Preview: Steady Margins, Strong Deal Pipeline

Tata Consultancy Services is expected to report muted sequential revenue growth in Q2 FY27, while margins are likely to remain broadly stable as AI-led pricing pressure weighs on growth. CNBC-TV18 poll estimates peg revenue growth at 1.3% QoQ to Rs 73,225 crore, while profit after tax is expected to rise 2.4% QoQ to Rs 13,673 crore. TCS is scheduled to announce its July-September quarter results on October 8, kicking off the Q2 IT earnings season. EBIT margin is expected to remain broadly steady, with analysts seeing support from the annual wage hikes having already been absorbed in the previous quarter. However, pricing pressure and AI-led productivity gains are expected to continue affecting revenue growth, keeping demand recovery and discretionary spending in focus. Deal wins remain a key positive for the company. HDFC Securities and Kotak Institutional Equities expect TCS' Q2 total contract value to be around $8-11 billion, supported by several multi-year contracts. The largest deal during the quarter was the $1.45 billion Porsche contract, while TCS also signed partnerships with ABB, JFK Airport, JLR, Aareal Bank, Dubai Gold & Commodity Exchange and Vodafone. Investors will watch whether these large deals translate into stronger revenue growth in the coming quarters. TCS' recent acquisitions are another focus area, including the $373 million acquisition of Porsche's IT arm MHP and the acquisition of Best Buy's Bengaluru GCC unit. The company is also investing in its AI strategy and has announced a Rs 70,000 crore investment for a 1GW data centre in Hyderabad. Management commentary on AI monetisation, hiring, the BSNL project and second-half demand will be important indicators for the company's growth outlook.