TCS Q4 Results Preview: BSNL ramp-down expected to hurt revenue growth

TCS Q4 results expected to show revenue decline due to BSNL ramp-down, with focus on margin and deal pipeline
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Tata Consultancy Services (TCS) revenue growth is expected to decline 0.2-0.5 per cent in the last quarter of FY25 owing to the ramp down of BSNL, hitting its topline.

The software company will release its Q4 results today.

According to Motilal Oswal, TCS is expected to post a revenue decline of 0.5 per cent on a sequential basis as the BSNL ramp-down starts taking shape. The manufacturing sector is expected to weaken while BFSI is to remain strong. EBIT margin may remain flat quarter-on-quarter, with operational efficiencies, despite headwinds from talent investments. The report expects Q4 margin to be aided by BSNL tapering, and pyramid benefits from early hiring in Q1/Q2.

Further, it expects the company deal pipeline to remain healthy with major countries and core verticals doing better in FY26 than FY25. The outlook on near-term demand and pricing environment, BFSI, and deal wins are key monitorables, said the report.

Nuvama Research estimated TCS to decline by 0.2 per cent sequentially due to BSNL ramp down as well, offset by strong rebound in developed markets. It expects margin to remain flat on a quarterly basis as BSNL tailwinds to come with a lag and deal-wins to be stable.

“We will watch out for outlook on US macro amid the tariff uncertainty and margin recovery trajectory,” said the report.

InCred Research said TCS too also expected services growth to be offset by the decline in BSNL revenue and absence of non-recurring license revenue recognized in the third quarter. USD revenue decline will be led by cross-currency headwinds.

“Headwinds from re-investments in business, including strengthening of partnership ecosystem, could offset margin tailwinds from INR depreciation, change in mix, and reversal of furloughs,” said the report, listing key monitorables as conversion of deal pipeline, FSI, retail & manufacturing vertical commentary, and large deal ramp-up outlook.

Biswajit Mohanty, Senior Principal Analyst at Gartner, told businessline that 2024 opened with strong optimism for growth, but the anticipated performance in Q3 did not materialize. Given the prevailing global economic pressures and geopolitical uncertainties, IT spending projections for 2024 were slightly revised downward from 8.2 per cent to 8.0 per cent, reflecting softer-than-expected investment in services and devices.

“With a significant share of revenue tied to the North American market, potential U.S. government policy shifts and budget cuts could reshape IT expenditure, impacting service and tech vendors alike. It’s possible that U.S. businesses may increasingly shift their attention toward cost reduction, which could have implications for global IT service providers. For those with heavy reliance on the Indian IT service providers, this might create challenges on both demand and pricing fronts—but it remains to be seen how significantly this will play out or whether the impact will be as noticeable as expected. But for now, the final quarter of last financial year is projected to end with modest revenue gains, consistent with trends seen over the past two years, as the industry looks ahead to a potential return to double-digit growth in 2025,” said Mohanty.

TCS shares declined 1.44 per cent on the BSE to close at ₹3,246.10, the day before declaring its results.

Published on April 10, 2025