TCS Q4 Results Review — Margin Recovery, Valuation Offer Cushion; Motilal Oswal Reiterates 'Buy' On The Stock

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Motilal Oswal Report

Tata Consultancy Services Ltd. reported revenue of $7.5 billion in Q4 FY25, down 1.0% QoQ in USD terms versus our estimated decline of 0.8%. FY25 revenue stood at $30.2 billion, up 4.2% YoY in constant currency. Q4 growth was led by BFSI (up 1.3% QoQ). Regional markets declined 6% QoQ (BSNL), whereas all other verticals were down ~1.0% QoQ.

In terms of geographies, India was down 15% QoQ, the US was flat, while Europe was up 2% QoQ. Ebit margin was 24.2% (down 30 basis point QoQ), below our estimate of 24.5%. PAT dipped 1.3% QoQ/1.7% YoY to Rs 122 billion (below our estimate of Rs 126 billion).

For the full year (FY25), revenue/Ebit/PAT increased 6.0%/4.6%/5.4% YoY (in INR terms).

TCS generated an free cash flow of Rs 464 billion in FY25 (up 4.2% YoY). In Q1 FY26, we expect revenue/Ebit/PAT to grow 2.2%/3.2%/2.8% YoY. TCS reported a deal total contract value of $12.2 billion, up 20% QoQ but down 8% YoY, bringing the FY25 total contract value to $39.4 billion. The book-to-bill ratio was 1.6 times. We reiterate our Buy rating on TCS with a target price of Rs 3,850, implying a 19% potential upside.

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