Tata Consultancy Services Q2 EARNINGS PREVIEW

India’s largest software exporter, Tata Consultancy Services, is set to announce its July–September quarter earnings on October 8, kicking off the second-quarter IT earnings season. The quarter was marked by several significant developments for the IT major. TCS secured a $1.45 billion mega deal with German luxury automaker Porsche, acquired Porsche’s IT services arm MHP, and announced a ₹70,000 crore data centre project in Hyderabad. Meanwhile, its parent company, Tata Sons, is dealing with an internal leadership rift. Despite the seasonally stronger quarter, analysts expect TCS to report muted sequential growth, with AI-led deflationary pressures continuing to weigh on the company’s growth prospects. TCS’s EBIT margin is expected to remain broadly stable, with some estimates pointing to an expansion of around 20 basis points from 24% in the previous quarter. The company had already absorbed the impact of annual wage hikes in Q1, leading analysts to expect some margin support in the September quarter. However, on a year-on-year basis, EBIT margins are projected to decline by around 100 basis points. The expected contraction reflects the impact of wage revisions, acquisitions and continued pricing pressure. Typically, margins tend to improve in the quarter following annual salary hikes, which could support sequential stability in Q2. Beyond the Porsche deal, TCS has secured several multi-year, multi-million-dollar partnerships with global clients, including ABB, JFK Airport, Jaguar Land Rover, Aareal Bank, Dubai Gold & Commodity Exchange and Vodafone.