Tata Consultancy Services (TCS IN) – Q1FY27 Result Update – Steady growth, optimistic of recovery from Q2 – BUY
Published on 10 Jul 2026
TCS reported 0.4% QoQ CC revenue growth, marginally ahead of our and consensus estimates; however, international business (excluding India) declined 0.2% QoQ (reported) after growing 1.6% QoQ in Q4FY26, reflecting the geo-political conflicts and continued macro uncertainty. While near-term demand remained soft across selected verticals such as Consumer and Manufacturing. The management sounded constructive and anticipates recovery in verticals except Consumer (non-essentials) from Q2FY27. Deal TCV was modest at USD9.5b, up 1% YoY, the ramp up of NN deal (US$800mn) should support the growth for the rest of FY27. Although the revenue from AI is growing at double-digit (QoQ), we believe the leakages in the traditional bucket are weighing on topline growth. We are keeping our growth rate (CC YoY) unchanged at 3.5% and 4.5% for FY27E/FY28E despite the mega deal awarded in Q1. On the margins front, Q1 margins were impacted by the annual wage hike (~170bps) along with continued investments in AI capabilities, partnerships, and net headcount additions (9k+QoQ). We are factoring in the Q1 miss and revise our margins downward by 40bps each for FY27E/FY28E, resulting in an EPS cut of 0.8% and 1.6%, respectively. We continue to value the stock at 15x FY28E EPS, to arrive at a TP of INR 2,500. Maintain BUY.
