Buy Tata Consultancy Services; target of Rs 3900

Mumbai, July 11, 2025 — Leading brokerage houses have reiterated a ‘Buy’ call on Tata Consultancy Services (TCS), setting a revised target price of ₹3,900, citing the company’s robust order book, resilient margin performance, and continued demand for digital transformation services. The bullish stance comes as TCS delivered a healthy performance in Q1 FY26 and sustained its position as a bellwether in India’s IT services landscape.

Strong Fundamentals Back Buy Call

TCS, a flagship company of the Tata Group, has demonstrated consistent growth despite global macroeconomic headwinds. In its recently released Q1 FY26 earnings, TCS reported a 13.2% year-on-year growth in its order book, reaching $9.4 billion, signaling strong client confidence and steady deal wins across sectors.

In rupee terms, TCS posted a net profit of ₹12,160 crore, up 8.5% YoY, while revenue rose 7.1% YoY to ₹63,700 crore. Operating margins remained stable at 24.4%, even amid wage hikes and onboarding of fresh talent, showcasing its operational efficiency.

Analysts See Upside Potential

Brokerage firm Motilal Oswal Financial Services maintained a ‘Buy’ rating with a target of ₹3,900, up from its current market price of around ₹3,600.

“TCS’s Q1 performance reflects strong execution and a healthy demand environment in key verticals such as BFSI, retail, and manufacturing. Its deal pipeline remains robust, and management commentary indicates sustained growth visibility,” said Ravi Menon, IT sector analyst at Motilal Oswal.

Another top-tier firm, HDFC Securities, also echoed a similar sentiment:

“TCS has improved its client mining and is investing heavily in AI-led and cloud-native services, which will be key growth drivers over the next 12-18 months.”

Growth Anchored in AI and Cloud

TCS has strategically aligned itself with the evolving digital landscape, focusing on AI, GenAI, cloud transformation, cybersecurity, and data analytics. The company has reported significant momentum in GenAI engagements, with over 150 active projects spanning multiple geographies.

CEO K. Krithivasan emphasized this direction in the Q1 investor call:

“We continue to see strong traction in GenAI, with clients increasingly looking to scale pilot programs to enterprise-wide deployments. Our talent investments and partnerships are geared to lead in this space.”

The company has also doubled down on large transformational deals, particularly in the US and Europe, which are key markets contributing more than 60% of its revenue.

Market Context: IT Sector Recovering

After a volatile FY25 marked by subdued discretionary tech spending in the US and Europe, the Indian IT sector is showing signs of revival. Analysts note that deal closures are accelerating, and budget finalizations are becoming more predictable.

“TCS is better positioned than peers due to its broad client base, consistent delivery metrics, and strong free cash flow generation. This defensive positioning makes it a preferred pick in the current market,” said Sakshi Shah, IT strategist at ICICI Direct.

Moreover, with the rupee stabilizing near ₹83/$, currency gains could offer a mild tailwind to export-oriented IT firms like TCS in the coming quarters.

Valuation & Shareholder Return

At the current valuation, TCS is trading at a PE multiple of 26x FY26E earnings, which analysts believe offers a favorable risk-reward profile. Additionally, its robust balance sheet—with over ₹70,000 crore in cash reserves—enables consistent dividend payouts and buyback potential.

In FY25, the company returned ₹45,000 crore to shareholders via dividends and buybacks, reinforcing its commitment to capital return.

Investor Outlook: Defensive Bet with Long-Term Promise

Given the global IT recovery underway and TCS's strong deal momentum, analysts advise investors to use any short-term dips as accumulation opportunities. The company remains a top pick for institutional and retail investors looking for stable earnings growth, high RoE, and strong corporate governance.

“TCS offers a rare combination of predictability, innovation, and scale. We believe it can comfortably surpass ₹3,900 in the next 9–12 months if macro tailwinds continue,” concluded Vivek Agarwal, head of research at Axis Securities.

Tata Consultancy Services’ Q1 performance and growth strategy offer a compelling case for long-term investors. Backed by strong fundamentals, a diversified revenue base, and digital leadership, the revised target of ₹3,900 reflects confidence in the company’s execution capabilities and future earnings potential.