Tata Consultancy Services Ltd (TCS) is expected to announce muted numbers for the December quarter on Thursday. Analysts are expecting the slow growth to continue, given higher furloughs in the seasonally-weak quarter, the impact of wage hikes on margins, and also status quo on the cautious commentaries.

While analysts have called this period to be the “final slowdown,” or the final inflection point before paving the path to recovery, most of them still gave tepid projections for Q3FY24.

“We expect TCS’ Q3FY24 revenue to be flat sequentially as growth was tepid due to ongoing weaknesses in discretionary spending and furloughs during the quarter. However, this downturn is expected to be partially mitigated by the positive impact of previously secured deals that are now ramping up. Margins, on the other hand, are anticipated to witness a slight expansion quarter on quarter, driven by the easing of supply-side constraints, operating leverage, and currency exchange benefits,” said Dhruv Mudaraddi, Research Analyst, Stoxbox. 

Optimistic outlook

Amit Goel, Co-Founder & Chief Global Strategist, Pace 360, added that the company’s revenue is poised to rise by 0.70 per cent on a q-o-q basis, reaching ₹60,100 crore, showcasing steady growth from the previous ₹59,692 crore. “Our optimistic outlook extends to the company’s operational performance, with the expectation of 2 per cent increase in operating profit on a q-o-q basis, projecting it to reach ₹14,787 crore compared with last quarter’s ₹14,483 crore.”

With Fed rate cuts expected, analysts are keeping a watchful eye on how the US market has performed in the current quarter. Mudaraddi added, “We would be looking out for comments on the demand outlook in the US (BFSI sector), the UK, and Europe, any signs of recovery in discretionary projects, and margin outlook.”

Muted hiring

Emkay report on the Indian IT sector added, “The IT sector index reported a sharp drop of 21.5 per cent year on year in Dec-23, and has now noted a decline for all months in the year – this reflects the persistent challenges faced by the IT sector, wherein muted demand has generated weak hiring trends in the last few quarters, in sync with the recent management commentary. Our latest interactions with the management suggest that there has been no material change, recently, in demand either, and potential recovery in hiring remains contingent on a macro recovery. “

Also read:Indian IT Industry grappled with gloom amid economic slowdown in 2023

With no  material change in the demand environment, muted hiring is also expected to continue in the near term.