Despite macro uncertainty and tight discretionary budgets, TCS continues to benefit from vendor consolidation/strong participation in large-scale AI-led engagements.
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IDBI Capital Report
Tata Consultancy Services Ltd. reported a 0.8% QoQ growth and 3.3% YoY decline in constant currency revenue driven by strong momentum across most verticals except Consumer Business and geographies excluding the UK.
Operating margin expanded 70bps sequentially to 25.2% (excluding one-time severance), aided by currency tailwinds, utilization gains, and pyramid rebalancing, partially offset by wage hikes and ongoing AI investments. Net margin stood at 19.6%.
TCS recorded its highest-ever quarterly TCV of $10 billion (+16% YoY), with BFSI at $3.2 billion and Consumer Business at $1.8 billion.
Management reiterated that FY26 international revenue growth will surpass FY25, supported by deal ramp-ups and robust demand in AI-led transformation, modernization, and cost-optimization programs.
Despite macro uncertainty and tight discretionary budgets, TCS continues to benefit from vendor consolidation/strong participation in large-scale AI-led engagements.
Investments in AI infrastructure (sovereign data center up to 1GW) and internal upskilling (160K AItrained associates) reinforce its vision to become the world’s largest AI-led technology services company.
Despite weak macros/tariff-related and H1B issues, improving deal conversion/better utilization, we upgrade our rating to Buy, with a same target price of Rs 3,733 (due to sharp correction in price), valuing at 24.9x FY27E earnings per share.
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Also Read: TCS Shares Can Zoom 21% Says Yes Securities Post Q1 Revenue, Margin Beat; 1GW Data Center Foray
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