Shares of IT bellwether Tata Consultancy Services (TCS) dipped 2% to Rs 2,016 on the BSE on Thursday as the company is all set to announce its results for the April-June quarter of the ongoing financial year 2027, officially kickstarting the Q1 earnings season for the IT pack on Dalal Street.
TCS shares have already crashed more than 36% this year so far amid multiple headwinds including AI worries, inflationary pressures due to the Middle East war and more. In this background, analysts on Dalal Street expect India’s largest IT services company to report modest profit growth for Q1 FY27, with weak revenue momentum.
What to expect from TCS Q1 earnings?
The Tata Group company is expected to report a 13% year-on-year growth in revenue and 4% YoY rise in profit for the quarter under review, based on an average of estimates by six brokerages. However, sequential growth is likely to be nearly flat.
IT services are expected to remain soft in Q1 FY27 amid a cautious demand environment, with growth partially supported by large deal ramp-ups, outcome-based engagements, and AI-led spending, Axis Securities said. It added that margins are likely to remain mixed, impacted by wage hikes and AI investments, but partly offset by currency depreciation and productivity gains.
Axis expects TCS to report a topline growth of 1% QoQ, supported by growth in BFSI, HiTech, and the benefit of rupee depreciation. EBIT margins are likely to decline by 98 bps QoQ due to wage hikes and continued AI investments. Key monitorables in TCS’ earnings print will include demand environment, deal pipeline, vertical-wise commentary and FY27 outlook, according to the domestic brokerage.
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Nomura in its note had said that Indian IT services companies, particularly largecaps like TCS, are in the midst of a perfect storm of two key headwinds. First, the macro uncertainty emanating from the ongoing Middle-East conflict and uncertainty around rates, particularly in the US, is keeping client spending subdued at the margin level. Second, when tech spending from clients is not increasing, there is heightened competition among IT services companies and the economic dividend of AI is being immediately surrendered to clients.
“With firms like Accenture indicating the lingering impact of the war on growth would continue in the near-term (implying a subdued 1H FY27F for Indian IT, in our view), we believe FY27F is likely to be another subdued year,” it said, while highlighting its optimistic outlook on long-term opportunities.
Nomura believes that the fear of frontier models implementation at enterprises displacing IT services vendors is overblown, as the context matters and tolerance for errors is zero. “We expect the upcoming earnings season to be sombre with weak quarterly growth trends from most of the large caps (weakest at -1.3% q-q from Wipro and the strongest at +1% for TechM. We expect mid-caps in general to continue posting stronger growth vs large caps. We do not expect any changes to the annual guidance from Infosys and HCL Technologies, and expect Wipro to guide -1% to +1% revenue growth in 2Q FY27E,” it said.
TCS share price
TCS shares have fallen around 39% in the past one year and 4% in one month, dropping to a fresh 52-week low of Rs 1,977 apiece earlier this month. The stock currently has a P/E ratio of around 15x.
In the longer term, the shares of the IT major have dropped more than 38% in three years and 36% in five years. The company currently has a market capitalisation of Rs 7.45 lakh crore.
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