TCS to log a steady Q3 amid AI pivot, IT spending trend in focus

ET Intelligence Group: Tata Consultancy Services (TCS) is expected to report a modest 0.3% sequential improvement in revenue to $7,486.6 million for the December quarter amid seasonal weakness due to holidays and delayed recovery in discretionary spending by clients. It will be the fifth consecutive quarter for the country's largest IT exporter to clock below 1% sequential top-line growth in dollar terms. The company is slated to declare quarterly performance on Monday. The estimates are based on the average of the forecast by ETIG and 11 broking firms.126473267 Rupee Weakness Equirus Securities expects Tata Consultancy Services to report 1% constant currency sequential growth in revenue. "...tepid growth is largely due to seasonal softness, lower billing days in international markets and also no major ramp-up is expected in the BSNL deal," mentioned the broking firm in a preview report. Anand Rathi Share and Stock Brokers highlighted in a report that the sequential revenue growth in the December quarter is characterised by cross currency headwinds as British pound, euro and rupee depreciated by 1.4%, 0.4% and 2.1%, respectively against the US dollar. In rupee terms, revenue of TCS is likely to grow by 1.4% sequentially to ₹66,715.4 crore while net profit may grow by 1% to ₹13,035 crore. The operating margin may improve by 20-40 basis points from 25.2% in the September quarter, aided by depreciation in the rupee against the dollar. HCL Tech Results HCL Technologies, the country's third largest software exporter, will also declare third quarter numbers on Monday. Its revenue is expected to grow by 2.1% sequentially to $3,721.8 million, helped by improving momentum in the products and platforms business. Its operating margin may improve by 60-100 basis points from 17.5% in the previous quarter amid focus on cost optimisation. Key Drivers Given the rising geopolitical uncertainty and increasing focus of clients on implementation of solutions driven by artificial intelligence (AI), it will be crucial to keep track of the management commentary on IT budget trend for 2026 and order pipeline. According to Kotak Securities, measures underway to accelerate revenue growth and wallet share shifts in developed markets and progress on planned data center investments will be critical for TCS while path of margin recovery to 18-19% band and drivers behind products business will be key factors for HCL Technologies.