The TCS share price is down 3% and the entire pack of Information and technology stocks is under pressure after the TCS Q1 numbers were announced yesterday. The stock is down nearly 18% so far in 2025. While the Q1FY26 net profit came in higher than estimates, the company has not yet made a decision on the wage hike. Moreover, the revenue fell 3.3% QoQ due to a sharp ramp-down in BSNL. Brokerages have cut their earnings estimates for TCS.
Here is a look at what key brokerages expect going forward-
Nomura on TCS: Target cut, growth visibility for FY26 hazy
Nomura maintains its Neutral call on TCS after the Q1 performance. They have also lowered the price target to Rs 3,780 per share, implying about 11% upside from current levels. The earlier price target was Rs 3,820. The cut in price target is primarily on the back of the big concern at this hour—the growth visibility for FY26 is still hazy.
Nomura does not expect significant improvement in FY26. According to them, TCS will have “some tailwinds from lower revenue contribution from the margin-dilutive BSNL project.” In Q1, the negative impact from lower utilisation (due to some project pauses and weak demand) was partly offset by lower third-party expenses (which dropped 310 bps QoQ due to lower BSNL revenue).
Another big worry is that TCS noted that its salary hike quantum and timing for FY26 have not yet been decided and will depend on business conditions. However, its long-term investment (in leadership hiring and training of employees) and fresher addition (40,000 gross addition in FY26) will continue. They expect “FY26 EBIT margin at 24.6% (+20 bps YoY)”
Motilal Oswal on TCS: Growth elusive, room for margin expansion
Motilal Oswal too raised the growth worries for TCS. They said, “growth for TCS remains elusive.” That said, sequentially, “the headwind from the BSNL ramp-down is now manageable, and there is enough slack in the pyramid to drive margin gains through the year,” they added. Valuations too “are undemanding,” according to them, and as a result, they have reiterated a Buy rating with target of Rs 3,850 per share. This implies 14% potential upside.
According to Motilal Oswal, the “productivity gains now becoming pervasive, but there are no signs of offsetting revenue growth. It is now clear that productivity benefits are being promised as a part of most deals, potentially dragging future revenues for the industry.”
The big worry for the brokerage is that the “kicker is missing in this cycle, putting further pressure on growth.”
Nuvama on TCS: Headline numbers weak, underlying decent
Nuvama has a Buy rating on TCS. They believe that though the headline numbers are weak, the underlying is reasonably encouraging. “While the BSNL deal ramped down sharply, the international business was largely stable. They reckon growth in international business shall revive as macro headwinds recede in coming quarters,” Nuvama added.
Going forward, Nuvama expects volatility in the near-term. They believe that the “demand environment may stay challenging in the next one–two quarters due to macro uncertainty. However, we stay positive on medium-to-long term outlook as technology debt is very high for enterprises, which will warrant a revival in spending as macro improves.”
TCS, post recent underperformance, “appears to be attractive—trading at 21.5x FY27—in line with its long-term average multiple.”