TCS, Tata Elxsi shares rise up to 3% ahead of Q2; here’s what to expect

Shares of Tata Group companies Tata Consultancy Services (TCS) and Tata Elxsi were trading in positive terrain in early trade, in sync with broader market, ahead of their September quarter earnings report. The boards of both companies are slated to meet today to approve second quarter results for the current fiscal.

Ahead of Q2 numbers, TCS shares opened at tad lower at ₹4,248.05 against the previous closing price of ₹4,252.30 on the BSE. Paring opening losses, the country’s most valued IT stock rose 0.9% to ₹4,290.20, while the market capitalisation climbed to ₹15.42 lakh crore.

On the other hand, Tata Elxsi gained as much as 3.4% to ₹7,873.30, while the market cap crosses ₹49,000 crore. The Tata Group stock opened higher at ₹7,629 against Tuesday’s closing price of ₹7,611.20 on the BSE.

Meanwhile, the BSE benchmark Sensex was trading 138 points higher at 81,605 level, led by Power Grid Corporation, Kotak Mahindra Bank, NTPC, Axis Bank, and M&M.

What to expect from TCS Q2 earnings?

According to market experts, largecap IT companies, including heavyweights TCS, Infosys, HCL Tech, are expected to report a moderated revenue growth of -1% to 3.6% on quarter-on-quarter (QoQ) basis.

The revenue growth of Indian IT companies is expected to continue in Q2, however margin expansion is likely to be restricted due to continued high attrition, says ICICI direct research in a note.

“We expect IT companies to post CC revenue growth between 3-5% for Q2FY23 with Infosys being at the higher end (5% CC revenue growth) in tier I IT companies while TCS, Wipro & HCL Tech (IT services) are expected to post constant currency (CC) revenue growth of 3%, 4% & 3.5% QoQ respectively,” it says.

TCS is projected to post revenue of ₹54,916 crore in Q2 FY25, up 17.2% YoY and 4.1% QoQ, while profit is estimated at ₹10,062.3 crore, posting a growth of 4.6% YoY and 6.2% QoQ. EBITDA is pegged at around ₹14,223.2 crore, up 8.5% and 6%.

Axis Securities expects TCS to report revenue growth of 2.8% QoQ, citing that wage hikes during the quarter are likely to result in margin contraction to the tune of 43 basis points (bps). Key attributes to watch out for are deal and pipeline, and total contract value; pricing scenario; and outlook on growth and margins.

Emkay in a note says that IT stocks’ earnings downgrade to bottom out in H1 FY25, if current expectations on the interest rate cut materialise.

How TCS, Tata Elxsi fared in Q1?

IT bellwether TCS posted 8.7% growth in consolidated net profit at ₹12,040 crore in Q1 FY25, compared to ₹11,074 crore in the same period last year. Sequentially, profit was down 3.2% from ₹12,434 crore in March quarter of FY24, due to the impact of the annual wage increments during Q1 FY25.

The revenue from operations rose 5.4% YoY to ₹62,613 crore as against ₹59,381 crore in the year ago period. On quarter-on-quarter (QoQ), the revenue dropped 2.2% from ₹61,237 crore in Q4 FY24.

The consolidated operating margin for the June quarter of FY25 stood at 24.7%, up 1.5% YoY, while the net margin was at 19.2%.

Meanwhile, Tata Elxsi reported revenue from operations was ₹926.5 crore, up 9% year-on-year increase and a 2.3% quarter-on-quarter. The net profit was ₹184.07 crore, down 2.53% YoY and 6.53% QoQ. EBITDA was ₹252 crore, which was flat annually but down 3% sequentially. 

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