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TCS Earnings: Margins Squeezed by Hikes, Rupee Offers Relief
9 Jul
Summary
- TCS' EBIT margins may decline 120 basis points due to wage hikes.
- A weaker rupee could provide a 40-50 basis points buffer to margins.
- US Dollar revenue is projected to decline marginally by 0.1%.
Tata Consultancy Services (TCS) is preparing to announce its first-quarter earnings on July 9th. Analysts polled expect a marginal sequential decline of 0.1% in US Dollar revenue, reaching approximately $7,611 million. This slight decrease is anticipated despite an expected 1.6% increase in rupee revenue to ₹71,847 crore.
The company's earnings before interest and tax (EBIT) are projected to fall to ₹17,348 crore, with EBIT margins potentially narrowing by 120 basis points to 24.15% from the previous quarter's 25.3%. This margin compression is attributed to wage hikes, though a weaker rupee is forecasted to provide a partial buffer of 40-50 basis points.
Looking at the broader financial year 2026, TCS reported a 0.5% revenue decline in dollar terms, but its EBIT margin of 25% was the highest in four years. Investors will also monitor potential one-time legal expense provisions and the company's order book, which is expected to range between $7 billion and $10 billion this quarter.
