TCS Q2 Results Review — Deal Wins Drive Growth, Margins Stable, Says Systematix Maintaining 'Buy'

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Systematix Report

Tata Consultancy Services Ltd. reported steady revenue growth in Q2 FY26, supported by broad-based improvement across most verticals and geographies. Barring India, the company posted a 0.6% QoQ revenue growth.

The quarter’s performance was aided by deal ramp-ups, operational discipline, and currency tailwinds, partly offset by residual macro caution impacting discretionary budgets in developed markets. The company reported a TCV of $10 billion, which included a large mega deal win during the quarter, providing enhanced revenue visibility for the coming periods.

Management reiterated confidence in a stronger FY26/27 growth trajectory versus FY25, underpinned by-

1. healthy deal conversions and pipeline visibility,

2. early signs of stabilization in Retail and sustained improvement in BFSI and Europe,

3. expanding AI adoption across client engagements driving incremental demand, and

4. steady IT services spending despite near-term macro uncertainties.

We have revised our USD revenue CAGR estimate for FY25–27E downward from 4.6% to 2.7%, factoring in near-term softness and a cautious demand outlook.

EPS and Ebit margin estimates for FY26E/FY27E assumptions remain largely unchanged.

Accordingly, we lower our target price to Rs 3,733 (Rs 3,864 earlier), based on a lower multiple of 24x FY27E EPS (25x earlier).

At 22x 1-year forward earnings, TCS trades at a 10% discount to its 10-year average—offering a favorable entry point.

Key risks:

1. Abrupt exit/s from the leadership team,

2. pressure on client discretionary spend sustaining in FY26/FY27,

3. non-encouraging outcomes of costsaving programs.

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