TCS Q4 Review: Brokerages Cut EPS Estimates Over Demand Concerns Due To Global Macro Uncertainty

Most brokerages revised down earnings and earnings per share estimates for Tata Consultancy Services Ltd. as the demand outlook is concerning because of the global macro uncertainty. Their revision came after Tata Consultancy Services posted a marginal revenue decline compared to an increase analysts were expecting. However, brokerages and analysts maintained the stock rating for the Indian IT major.

Increased uncertainty on the global front due to the tariff threat from the US and rising tension between the US and China are not good for IT companies' growth, as it will impact the demand environment. The impact will play out in the first half of the financial year, which is generally a strong period for IT companies, according to Kotak Institutional Equities.

Kotak Institutional Equities cut Tata Consultancy Services' revenue growth estimate by 0.6% and EBIT margin estimate by 40–70 basis points. The broking also incorporated rupee depreciation into the estimates. The brokerage maintains a 'Buy' rating on the stock and reduced the target price to Rs 3,800 from Rs 3,900, which implied a 17.23% upside from Wednesday's closing price.

• Revenue up 0.79% at Rs 64,479 crore (estimate: Rs 64,848.2 crore).

• EBIT down 0.36% to Rs 15,601 crore (estimate: Rs 16,141.2 crore).

• Margin contracted 27 basis points to 24.19% (estimate: 24.89%).

• Net profit fell 1.26% to Rs 12,224 crore (estimate: Rs 12,766 crore).
  

Tata Consultancy Services' management believes the uncertainty from tariffs is temporary. Strong deal wins in the last two quarters will support the company's growth in financial year 2026. They continued to guide for higher growth, especially in developed markets. However, Nuvama reduced EPS estimates by 2.4% and 2.7% for the current and the next financial years, respectively.

Nuvama keeps a 'Buy' rating on the stock, while it increased the target price to Rs 4,200 from 4,050 apiece earlier. The target price implies a 29.67% upside from Wednesday's closing price. The reason behind retaining the stock is attractive valuation.

Dolat Capital Research is expecting 1.8% constant currency growth in the ongoing quarter after noting recovery in some verticals and execution of healthy total contract value wins. However, TCV will be moderated by BSNL deal completion. Tata Consultancy Services' operating profit margin to contract 39 basis points in the April–June quarter.

Dolat Research Capital also lowered EPS estimates for the ongoing and the next financial year by 3.4% and 3.7%, respectively. They upgraded the rating to 'Accumulate' from 'Reduce'. However, they cut the target price to Rs 3,760 from Rs 4,270 apiece. The current target price implied a 16% upside from Wednesday's closing price.