TCS Q4 preview: Muted revenue growth likely, deal momentum seen strong

Tech giant, Tata Consultancy Services is also set to kick start the fourth quarterly earnings season for FY23 on April 12. In regards to TCS, ICICI Direct in its report believes that the Q4 is a seasonally weak quarter for the company due to fewer working days and some furlough impact in January. Growth is expected to be driven by continued deal momentum especially in cost take-out deals, cloud transformation and some benefits likely coming from vendor consolidation." ICICI Direct believes that TCS will miss the target exit EBIT margin range of 25% as lower growth would be an additional headwind. As per Kotak, key factors that investors can focus on TCS' Q4 results are: - CY2023E budget closure and pace of decision-making and ramp up of budgeted spends; - pipeline of cost take-out and vendor consolidation decisions of clients and win-rates; - changes to strategy, key bets and priorities of the organization under new CEO and continuity of current organizational structure that underwent a reorg under Rajesh; - health of impacted verticals/geos especially hi-tech, retail and Europe; - outlook of spending in BFS given recent events and exposure to impacted companies; - how the current slowdown and potentially even recession differ from the past; - whether attrition rate can reduce to pre-Covid levels and maintain pre-Covid level gap with peers and - levers to increase margin back to 26-28% range.