TCS Q2 Results Review - Outlook Trendline Remains Positive: HDFC Securities

HDFC Securities Institutional Equities

Tata Consultancy Services Ltd. posted a mixed quarter with a growth skew from the BSNL deal, but the outlook trendline remains positive. The positive markers that aid growth visibility are-

1. BFSI acceleration,

2. transitory factors, for Q2 moderation,

3. strong deal pipeline and commentary on discretionary spending improving, and

4. pent-up spending on tech modernisation and incremental opportunity from GenAI (doubling of PoCs/engagements).

The concerns of broadening vertical portfolio underperformance and the absence of mega deals in H1 FY25 are transitory and client-specific. The margin miss is directly linked to a higher mix from the BSNL deal during the quarter – a natural margin tailwind for FY26E as that revenue pool recedes.

Earnings estimate nearly unchanged – maintain Add on TCS with target price of Rs 4.650 based on 28 times Dec-26E earnings per share.

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