TCS Q2 results draw mixed reactions from top brokerages like Goldman Sachs, Jefferies, Citi, and CLSA as data center plans expand but near-term growth outlook remains cautious.
What Are Brokerages Saying About TCS After Its Q2 Results?
About TCS Q2 Performance
Tata Consultancy Services (TCS) posted steady second-quarter results with constant currency revenue growth in line with estimates and a modest EBIT improvement year-on-year. The company’s expansion plans in AI-driven data centers and global M&A have become focal points for analysts evaluating its next phase of growth. Despite mixed sentiment, most brokerages acknowledged TCS’s resilience amid a slow IT spending environment.
Goldman Sachs: Buy Rating Maintained
Goldman Sachs retained its Buy recommendation with a target price of ₹3,300. The brokerage noted that TCS’s EBIT growth outperformed slightly while revenue remained stable. Analysts view the company’s plan to develop 1 GW of data center capacity over the next 5–7 years as a structural positive, representing up to 20% of India’s total data center capacity. Goldman Sachs believes this initiative strengthens long-term competitiveness despite near-term margin pressure.
Jefferies: Cautious with a Hold Rating
Jefferies lowered its target to ₹3,100 (from ₹3,230) while maintaining a Hold rating. The brokerage cited weak growth trends and limited near-term upside from the data center business. It also flagged a 3% QoQ headcount decline as a reflection of demand softness across key markets. Jefferies acknowledges that TCS’s renewed focus on AI and M&A is promising, though earnings visibility may remain subdued in the short run.
Citi: Neutral-to-Negative Tone
Citi reiterated its Sell stance with a target price of ₹2,800. It pointed out that TCS’s asset intensity may rise over the medium term due to the capital-heavy data center expansion. The brokerage also expressed concerns over rising competitive intensity within traditional IT services and potential pricing pressure as AI integration accelerates. Citi expects flat growth in core services until demand recovery becomes visible.
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CLSA and MOSL: Optimistic on Long-Term Outlook
CLSA maintained its Outperform rating with a target price of ₹3,559, citing a beat on revenue, EBIT margin, and order bookings. The brokerage expects stronger demand in the second half of FY26 as enterprise AI adoption scales up.
Meanwhile, Motilal Oswal (MOSL) reiterated a Buy with a higher target of ₹3,500 (from ₹3,350), noting that the data center initiative could be a long-term value driver despite modest near-term growth.
Nuvama’s View: Strategic but Volatile
Nuvama Institutional Equities retained its Buy stance but reduced its EPS estimates by 2% for FY26E and FY27E. The firm believes the 1 GW AI data center plan is strategically sound, although near-term execution volatility could weigh on sentiment. Long-term investors, it says, should focus on TCS’s steady dividend yield and strong balance sheet.
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Sector Implications and Broader Takeaways
Brokerages agree that TCS’s Q2 results signal an inflection point for India’s IT services landscape. The data center expansion demonstrates strategic foresight, but the near-term narrative remains clouded by global macro uncertainty and client budget caution. The transition to AI-led digital transformation is expected to shape TCS’s growth trajectory through FY26–FY28.
Investor Takeaway
Indian-Share-Tips.com Senior IT Market Strategist Gulshan Khera, CFP®, who is also a SEBI Registered Investment Adviser, notes that TCS’s continued investment in cognitive infrastructure positions it ahead of peers in the AI automation curve. He advises investors to focus on sustainable margin expansion and cash flow consistency rather than short-term price swings triggered by quarterly results.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
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