Hence, Q4FY14's QoQ revenue growth could be lower than the October-December quarter (Q3) at 3%, but "this should not be any indication of slowdown in demand," clarified the management.
The management, however, has reiterated that the FY15 revenue growth would be higher than FY14, led by improvement in discretionary spending in the US and market penetration in Europe.
Key takeaways from TCS analysts meet highlighted the fact that near-term commentary remains soft, but the management retains its positive discretionary spend-led FY15 outlook.
TCS expects Q4 to be softer than Q3 in CC terms, growth to be led by Europe and Latam, and India to decline. But the management is confident of a strong outlook for FY15 over FY14. Margins, however, are likely to drop 40-50bps QoQ due to investments.
However, analysts at top brokerage firms are of the view that revenue growth will be seasonally low in the upcoming quarter, but overall trends look positive and currency will play a small role in Q4. But investors who want to remain invested in the IT space for long term should look at accumulating the stock on dips.
"Margin impact of currency fluctuations and reinvestments would likely be 40-50bps in Q4FY14. We adjust our FY14-15 estimates as per management commentary, but maintain our rating on TCS," Barclays said in a note.
Barclays has incorporated the management commentary in their forecasts and consequently lowered their FY15-16 EPS estimates by 1.0 per cent. The global investment bank has revised its target price to Rs2,275 and maintains 'equal-weight' rating on the stock.
Earlier in the month of March, Bangalore-based Infosys spooked the street after chief executive SD Shibulal told investors the company was expecting to end the current fiscal year only near the lower end of its 11.5-12% guidance.
Reacting to the news, most brokerage firms reduced their respective target prices for Infosys. BofA-ML, Deutsche Bank and Barclays reduced their respective 12-months target prices by Rs 200-300.
But analysts are more confident this time on TCS and see more of a temporary phase for the company as management still remains confident about global operations.
Analysts expect the IT major to outperform industry on revenue growth as management commentary on demand trends for FY2015 continued to be reassuring, led by a favorable demand environment and market share gains.
"We expect TCS to outperform industry on revenue growth due to its superior market reach and excellent execution capabilities. We expect TCS to grow its USD revenues at a CAGR of 16.5% over FY2013-15 and EPS at a CAGR of 25% during this period," Angel Broking said in a report.
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