Noida, Oct 9 (APAC Media): Shares of Tata Consultancy Services (TCS) rose nearly 4% after the IT major reported its second-quarter results, with brokerages maintaining differing views on the company’s growth prospects amid pressure on margins and cautious client spending.
TCS reported a 15% year-on-year increase in consolidated net profit to Rs 13,884 crore for the July-September quarter, compared with Rs 12,075 crore in the corresponding period last year. Revenue rose 11.2% to Rs 73,188 crore.
In constant currency terms, revenue grew 0.5% sequentially, while the operating margin stood at 24%.
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The company also declared a second interim dividend of Rs 12 per share for the financial year.
Goldman Sachs retained its ‘Buy’ rating on TCS with a target price of Rs 2,210 per share. The broking said revenue performance was broadly in line with expectations but flagged margin pressures and an increase in employee headcount.
It lowered its operating margin estimates by up to 20 basis points while largely maintaining its revenue and earnings forecasts.
Nomura also maintained a ‘Buy’ rating, with a target price of Rs 2,630, citing improving international business performance and opportunities in artificial intelligence (AI).
However, the broking cautioned that clients continued to exercise restraint in discretionary technology spending, which could weigh on near-term growth and profitability.
Nuvama remained positive on the stock, retaining its ‘Buy’ recommendation and a target price of Rs 2,750. The broking expects a gradual recovery in FY27, supported by improving international demand and a growing contribution from AI-related services.
Morgan Stanley, meanwhile, maintained an ‘Equal-weight’ rating with a target price of Rs 2,160, reflecting a more cautious assessment of the company’s near-term prospects.
The broking noted that international revenue improved sequentially and AI revenue accounted for more than 10% of total sales.
However, it cautioned that continued investments and margin pressures could limit the pace of recovery.
A return to an operating margin of 25% by the fourth quarter of FY27 appeared unlikely, according to Morgan Stanley’s assessment.
The divergent broking views highlight the balance between emerging AI opportunities and persistent challenges in the traditional IT services business.
TCS management has highlighted opportunities in AI-led transformation projects, with the company seeking to help clients adopt new technologies through scalable platforms and strategic partnerships.
However, analysts said the sustainability of the stock’s gains would depend on stronger revenue growth, improved deal conversions and the company’s ability to protect margins.
Investors will also track international demand and the pace at which AI-related opportunities translate into meaningful revenue growth in the coming quarters.
The stock’s post-results rally reflects optimism over the company’s earnings performance, although brokerages remain divided on how quickly business momentum can strengthen.
-ENDS–
Disclaimer: This article is for informational purposes only and is based on publicly available information. APAC Media is not responsible for investment decisions or losses. Please conduct your own research or consult a financial adviser before investing.
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