Tata Consultancy Services (TCS IN) – Q4FY26 Result Update – In line quarter, but FY27 looks blurry – BUY
Published on 10 Apr 2026
TCS Q4’s performance of 1.2% QoQ CC growth was largely in line with our estimates of 1.3% growth, aided by broad-based growth across all major geographies and segments except BFSI & CMT. AI revenue momentum continued with annualized revenue of USD 2.3 bn, up 27.8% QoQ and now forms 7.7% of revenue mix. However, geopolitical conflicts are not only having a direct impact on Travel and Transportation verticals, but delaying decisions within key verticals, especially BFSI. The vertical (BFSI) reported 2.9% USD growth in FY26, which will likely create a headwind in FY27E. The deal TCV growth remains weak (3.6% YoY) at 40.7b, despite the company winning 5 mega deals in FY26. Considering the factors above, we are trimming our revenue estimates by 40/30bps; expect CC revenue growth of 4.5% including inorganic (30bps) in FY27E followed by 5.1% in FY28E, respectively. On the margin front, we expect improvement of 30bps & 20bps (earlier 50bps & 30bps), respectively in FY27E & FY28E on account of forging partnerships with frontier model providers and investments in talent re-skilling activities. However, the management indicated that achieving 26% EBIT margin continues to be the long-term aspiration. We assign 20x to FY28E EPS that translates a TP of 3,450. Maintain BUY.
