TCS shares jump 4% after Q2 results. What are Goldman Sachs, Nomura, others saying?

Shares of information technology major Tata Consultancy Services (TCS) rallied as much as 4% to their day’s high of Rs 2,163 on the BSE on Friday after reporting 15% year-on-year (YoY) growth in its consolidated net profit at Rs 13,884 crore for the second quarter. The same stood at Rs 12,075 crore a year ago. The Board has declared a second interim dividend of Rs 12 per share for the financial year 2026-27.

In constant currency terms, revenue rose 0.5% quarter-on-quarter. Operating margin came in at 24%, while net margin stood at 19%.

CEO and MD K Krithivasan said the company saw broad-based growth across international markets and most industry segments. He said the Porsche and Best Buy deals represent a new category of transformation partnerships and that TCS is building repeatable platforms with clients to industrialise AI at scale.


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TCS Share Price: Buy, sell or hold post Q2 results

Nomura has maintained its Buy rating on TCS with a price target of Rs 2,630, implying an upside of 27%. The brokerage noted that the company's trailing 12-month deal wins remained flat year-on-year, while near-term demand conditions were largely unchanged as clients continue to scrutinise discretionary spending that does not offer immediate benefits.

Nomura expects margins to remain subdued in the near term as TCS continues to reinvest in growth. The company's EBIT margin stood at 24% in Q2FY27, unchanged sequentially, as investments in AI partnerships and ecosystems, along with a 90-basis-point quarter-on-quarter increase in subcontractor expenses, were partly offset by currency tailwinds and ongoing cost optimisation. TCS also indicated that the integration of the Porsche project would weigh on margins by 50 basis points in the quarter in which it closes, either Q3 or Q4FY27. The company plans to offset this impact through further cost optimisation and lower subcontractor expenses. Nomura expects EBIT margins of 24.1-24.8% in FY27-28, compared with 25% in FY26 on an adjusted basis.

Morgan Stanley has maintained its Equal-weight rating on TCS with a target price of Rs 2,160. The brokerage noted that international revenue grew 1.2% quarter-on-quarter in constant currency terms, while AI revenue crossed 10% of total sales. Management continues to prioritise near-term investments over margin expansion, indicating that the margin anchor is unlikely to return to 25% by Q4FY27. The stock's two-year forward price-to-earnings multiple of 12.8x offers some downside protection, although the brokerage sees no immediate catalysts for outperformance.

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Goldman Sachs has maintained its Buy rating on TCS with a target price of Rs 2,210. While revenue growth was in line with estimates, margins fell short of expectations as headcount increased for the third consecutive quarter, the foreign brokerage said. EBIT margins remained flat sequentially despite international growth and the absence of wage hikes, prompting the brokerage to cut its EBIT margin estimates by up to 20 basis points. Deal win growth also turned negative, signalling a subdued revenue growth environment, although Goldman Sachs largely retained its revenue and earnings per share estimates.

Nuvama has a Buy rating and a target of Rs 2,750, an upside of 32.5% from current levels. “TCS is well positioned for a gradual recovery in FY27 with improving international growth and strong traction in AI revenue. While nearterm margins face pressure, we view investments for growth as the right strategy,” the brokerage said. It values the stock at 16x FY28–29 average PE—currently trades at 12.5x FY28 PE.

Disclaimer: This article has been written by Veer Sharma, who is not a SEBI-registered Research Analyst or an Investment Adviser. Veer Sharma and his ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment. Brokerage disclaimers here.