Tata Consultancy Services has kicked off earnings season on an encouraging note and set the tone for other tech stocks. The tech giant shares surged 4% to a high of Rs 2,133.30 on the NSE after delivering a largely in-line set of numbers. While most analysts see green shoots over the short-term, they have maintained a cautious tone about the longer-term expectations.
Motilal Oswal on TCS
TCS expects the demand to improve in Q2, supported by a pent-up technology backlog and stronger client conversations. While Motilal Oswal expects “Q2 to be better, we believe evidence around demand improvement is scant. The pent-up demand narrative has been around for some time, while geopolitics, tariff uncertainty and cautious discretionary spending continue to weigh on decision-making.”
They “continue to expect FY27 demand to remain muted.” Commentary, however, is better than what they expected.
They rated the stock ‘Buy’ with a target of Rs 2,350 per share. This implies about 15% upside from current levels.
The TCS management acknowledged 10-15% AI-led productivity pass-throughs as projects come up for renewal. They believe the “full impact of AI deflation is still unfolding, and productivity gains are likely to continue getting passed on to clients over the coming quarters, keeping pressure on the existing book of business.”
Nuvama on TCS
Nuvama Institutional Equities has cut its 12-month price target to Rs 3,000 from 3,350. However, the brokerage retained its ‘Buy’ rating on the Tata Group company.
The brokerage said that TCS appears to be well set for recovery in FY27, given its commentary and strong hiring in Q1. Deal wins have been decent, margins solid, and AI revenue is growing strongly.
“We minutely tweak our FY27 and FY28 EPS estimates by -0.5% and -1.2%,” said Nuvama. Valuation of 13x FY27 PE, post-recent correction, is highly attractive.
TCS Q1 FY27
TCS posted a decline of 2.7% sequentially in consolidated net profit of Rs 13,349 crore for Q1FY27, compared with Rs 13,718 crore in the preceding quarter.
Excluding the exceptional legal cost, however, net profit stood at Rs 13,849 crore. The company’s net profit was weighed down by a one-time legal provision.
Its revenue surged 2.2% quarter-on-quarter to Rs 72,275 crore in Q1FY27 from Rs 70,698 crore in the first quarter of the current financial year. In constant currency terms, revenue grew 0.4%, slower than the 1.2% growth reported in the previous quarter.
Its operating margin shrank 130 basis points QoQ to 24% from 25.3%, mainly on the back of annual wage revision. The company said wage hikes brought down 170 basis points from margins, partly offset by a 40-basis-point currency benefit. Operating income came in at Rs 17,317 crore compared to Rs 17,870 crore in the previous quarter.
The tech company’s CEO and MD, K Krithivasan, said, “We don’t see a massive contraction or deflation due to AI. If any, they are compensated by additional opportunities that we generate through AI.” He also said that most enterprises will have multiple LLMs or one LLM with several SLMs. TCS is in an area where system integrators will have a bigger role to play.
Krithivasan said, “We hire whenever we feel we’ll have enough demand and for specific skills,” after TCS hired around 10,000 people this quarter despite weak growth. The CEO doesn’t believe AI will reduce overall headcount.
Also, the company’s board has approved an interim dividend of Rs 12 per share for the financial year 2026-27 and fixed July 15 as the record date.
TCS share price performance
The share price of TCS has fallen 2.23% in the last five trading days. The stock has declined 4.4% in the past one month and more than 36% in the last six months. TCS share price has drowned 39% over the previous 12 months.