HDFC Securities highlighted that AI has emerged as the key growth driver for TCS, with annualised AI revenue surpassing $3 billion, 19.2% QoQ and 72% YoY, and contributing ~10% of revenue vs 8.6% in Q1. Non-AI revenue declined ~3% YoY, reflecting the deflationary impact of AIled productivity gains on traditional services. Adoption is broadening across AInative solutions, autonomous systems and AI-led business-process transformation, with BFSI, Manufacturing and Life Sciences leading.
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HDFC Securities Institutional Equities
HDFC Securities has retained its Add rating on Tata Consultancy Services, setting a target price of Rs 2,470 target price.
The brokerage expects TCS' growth momentum to improve gradually as international business strengthens and AI adoption accelerates, though elevated subcontracting costs and continued investments could keep near-term margins under pressure.
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The brokerage highlighted that AI has emerged as the key growth driver, with annualized AI revenue surpassing $3 billion, 19.2% QoQ and 72% YoY, and contributing ~10% of revenue vs 8.6% in Q1.
Non-AI revenue declined ~3% YoY, reflecting the deflationary impact of AIled productivity gains on traditional services. Adoption is broadening across AInative solutions, autonomous systems and AI-led business-process transformation, with BFSI, Manufacturing and Life Sciences leading.
TCS also launched its AI Agent Hub and is strengthening agent governance, token-cost management and cybersecurity capabilities. Management indicated AI revenues carry better margins than the company average.
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The brokerage also adds that margins remain a key monitorable as elevated subcontracting costs, which are likely to rise further given the recent tightening of US immigration rules, and sustained investments in talent, partnerships and highgrowth areas are expected to weigh on near-term profitability.
MHP consolidation adds a further ~50 basis points headwind. Nevertheless, management reiterated its longterm margin aspiration of 26-28%, backed by growth, subcontractor optimisation and operating leverage.
Hiring momentum remains robust, with ~10,000 freshers added in the quarter and further hiring planned in H2, signalling confidence in the pipeline.
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