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Five things to watch out from TCS Q1 results; Analysts expect growth

TCS has said the drop in its Diligenta business had plateaued in the 4th quarter and it was seeing growth in Latin America.

, ET Bureau|
Updated: Jul 13, 2016, 09.37 PM IST
TCS expected to post 3.7% revenue growth in Q1
MUMBAI: Tata Consultancy Services, India's largest IT services company, will kick off the IT earnings season when it reports its results for the first quarter of the year on Thursday evening. Here are five things to watch out for:

Revenue Growth: TCS snapped a six-quarter spree of disappointing results when it met analyst expectations in the fourth quarter. Analysts expect the company to report about 3.5% to 3.7% sequential growth in constant currency. Growth will be driven by its digital business which has been growing 50% year over year. But as digital only contributes about 15% of revenue, TCS will need its core business to grow well.

Segments: TCS has said the drop in its Diligenta business had plateaued in the fourth quarter and that it was seeing growth in Latin America. But Japan still remains a concern.

Digital Revenue: At the end of fourth quarter, digital contributed 15.5% of TCS’ revenue, up from 13.7% in the third-quarter and it grew over 52% year-over-year. Digital services contributed $2.3 billion to the company full year revenue of $16.5 billion. But the company has not broken out what exactly it defines as digital, and how much this revenue may be cutting into business that was traditionally part of infrastructure services. Analysts are looking for more detail on the business.

Headcount and Automation: TCS hired 90,182 people in FY16, its highest ever gross addition and indicated that its hiring would decrease in the current financial year due to the impact of automation. Analysts will be keeping a watchful eye on this.

Brexit: TCS gets 15% of its revenue from the UK. It saw a sequential contraction in revenue from this region in the last quarter due to its Diligenta business. Now analysts will wait for the company to spell out the likely impact of Britain leaving the European Union.

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