Tata Consultancy Services Ltd. has been rated equal weight by Morgan Stanley after its acquisition of Best Buy's Global Capability Center. The rating also follows blockbuster results by Ireland-headquartered software services giant Accenture Plc.
MS has fixed a price target of Rs 2,160 for the IT behemoth, implying an upside of nearly 4% from its current market price of Rs 2,079.30.
Tata Consultancy Services announced a multi-year agreement on October 1, 2026, to take over American consumer electronics retailer Best Buy's Global Capability Center (GCC) in India (located in Bengaluru) and transform it into an AI-native capability hub.
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Essentially, Morgan Stanley sees this Rs 0.1 milion deal as strategically positive for the company, despite its small size. The deal is expected to be sealed within three to four weeks.
MS noted that TCS is increasingly pursuing capability-led acquisitions and that the recent deal could deepen ties with Best Buy over time. The brokerage also expects better revenue visibility to outweigh margin dilution concerns.
Accenture PLC Earnings Ripple Not Effective?
Brokerages remain cautious India's IT sector even after Accenture Plc's blockbuster earnings. The consulting giant reported earnings per share of $3.29 on revenue of $18.68 billion, surpasssing analysts' consensus estimates of $3.18 earnings per share and revenue of $18.03 billion.
CLSA believes that TCS' valuation could remain in-line with Accenture and has maintained a 'hold' rating on the shares, but GS sees results as neutral-to-negative for Indian IT. The software co's FY27 guidance signals downside risk to India IT estimates.
Therefore, expected growth recovery for Indian IT may not materialise, as per GS. The brokerage outlined that industry checks show no meaningful demand recovery and highlighted elevated competitive intensity across the industry.
GS outlined that competition will keep margins under pressure for Indian IT and that Accenture's beat does not signal a broader sector recovery. For the sector, weak demand, slower growth and pricing pressure remain concerns
TCS Q1 FY27 Recap
Tata Consultancy Services Ltd. net profit fell 2.7% at Rs 13,349 crore in the first quarter of this fiscal. This is in comparison to profit of Rs 13,718 crore in the fourth quarter of fiscal 2026.
Consolidate revenue of the IT giant advanced by 2.2% quarter-on-quarter for the three months ended June, reaching Rs 72,275 crore in comparison to Rs 70,698 crore. Operating income, or earnings before interest and taxes fell 3% to Rs 17,317 crore from Rs 17,870 crore. Margins contracted to 24% from 25.3% in the previous quarter due to hike in wages.
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