Tata Consultancy Services (TCS IN) – Q3FY26 Result Update – Steady performance, multiple one-offs impact bottom line – BUY
Published on 13 Jan 2026
The revenue performance (+0.8% QoQ CC) exceeded our estimates (+0.5% QoQ CC), aided by broad-based growth, international business was up 0.4% QoQ CC. Beyond furloughs, the growth momentum within BFS was steady and should rejoin the positive growth trajectory from Q4. The pockets of weakness is visible in certain sub-segments of Retail and Manufacturing, while essential and non-Automotive delivered healthy performance. The slowdown in legacy offerings is partly compensated against strong uptick in AI revenue stream, which reported annualized revenue run-rate of USD1.8bn (+17.3% QoQ CC). The management was confident of sustaining international revenue growth in the coming year on the back improving visibility in North America and continued momentum within key pockets. Given the low base of revenue in FY26 and steady recovery within international business, we expect 5.4% USD revenue CAGR over FY26-28E. On the margins, the compensation revision is behind, while we also anticipate the residual headcount trimming exercise to be executed in Q4. Hence, we are revising FY26E/FY27E/FY28E, adjusting operating margin up by 10bps/20bps/10bps respectively. We assign 23x to FY28E EPS that translates a TP of 4,040. Maintain BUY.
