Tata Consultancy Services (TCS) may have fallen short of earnings expectations for the January-March quarter, but brokerages remain largely bullish on the company’s long-term prospects, on the back of a solid deal pipeline and anticipated margin recovery in FY26.
The company posted a consolidated revenue of Rs 64,479 crore during the quarter, which was up 0.8% sequentially, but below Bloomberg’s estimate of Rs 64,837 crore. Net profit came in at Rs 12,224 crore, a 1.3% decline from the previous quarter and below estimates of Rs 12,765 crore. Operating margins also dipped by 30 basis points to 26.3%, impacted by salary revisions and higher marketing and travel spends.
Despite the earnings miss, analysts continue to emphasise TCS’s long-term resilience. The firm recorded a total contract value (TCV) of $12.2 billion in the fourth quarter, a 20% increase over the previous three months. Its full-year FY25 TCV stood at $39.4 billion, reinforcing confidence in its ability to weather near-term turbulence.
Motilal Oswal Financial Services acknowledged elevated revenue risks in the near term, citing discretionary spending weakness and the ramp-down of the BSNL project. However, the brokerage projected a margin recovery in FY26, driven by cost rationalisation and an expected rebound in client spending. “Margins were a disappointment in the fourth quarter, but BSNL’s ramp-down is likely to come with a reduction in third-party costs. We expect margins to improve to 25.3% in FY26,” it said, assigning a target price of Rs 3,850 to the stock.
HDFC Securities shared a similar outlook, calling the current slowdown in discretionary tech spending a temporary pause rather than a structural shift. The firm highlighted the breadth of TCS’s deal wins in the March quarter, suggesting underlying demand remains intact.
On Friday, TCS shares closed down 0.3% at Rs 3,238 on the National Stock Exchange. Nonetheless, several brokerages see significant upside potential at current valuations. Antique Broking upgraded the stock to ‘buy’ from ‘hold’, citing a 30% correction from its peak and estimating a 28% upside. “Client budgets are flat, and while discretionary spends are delayed, they are not being cancelled. A gradual recovery is expected from the second half of FY26,” it noted.
Prabhudas Lilladher also maintained a ‘buy’ call, raising its target price to Rs 4,810. It expects margin expansion in the next fiscal, driven by improved traction in core markets and reduced drag from the BSNL contract.
TCS management acknowledged some emerging uncertainty in demand since March 2025 but confirmed that no major client projects have been cancelled. While sectors such as retail, travel, and automotive may face pressures from tariffs and broader macro challenges, BFSI continues to remain stable, barring some softness in insurance.
The company attributed the margin dip in the fourth quarter to tactical measures, including a merit-based promotion cycle from January 1, which shaved off 100 basis points. Elevated strategic marketing and travel costs added 60 basis points of pressure, though this was partially cushioned by currency gains of 40 basis points.
Analysts said that while caution is warranted in the short term, TCS remains well-positioned for a recovery, supported by strong client relationships, a healthy deal pipeline, and disciplined cost management.