In its latest research update, Mirae Asset Sharekhan maintains a BUY recommendation on Tata Consultancy Services (TCS), India’s IT bellwether, despite a challenging quarter marked by subdued revenue growth and macroeconomic headwinds. The brokerage underscores TCS’s robust deal pipeline, margin resilience, and leadership in digital transformation as pivotal factors supporting its bullish stance. With a revised target price of Rs 3,900, the report highlights both the near-term challenges and the long-term investment thesis, providing investors with a comprehensive roadmap for navigating the current landscape.

Summary of the Investment Thesis

TCS’s Q1FY26 performance was characterized by weak revenue momentum, largely due to the tapering of the BSNL deal and broader macroeconomic uncertainties. However, the company’s ability to expand margins, secure record deal wins, and maintain operational discipline reinforces its status as a formidable long-term investment. Mirae Asset Sharekhan’s BUY call is underpinned by expectations of a gradual recovery, driven by demand for AI, cloud, and modernization services. The stock is currently trading at attractive valuations, with a one-year forward P/E of 23.6x FY26E EPS and 21.7x FY27E EPS, offering significant upside for patient investors.

Key Investment Levels and Target Price

Current Market Price (CMP): Rs 3,382
Target Price: Rs 3,900
52-Week Range: Rs 4,586 / Rs 3,060
Valuation Multiples: 23.6x FY26E EPS, 21.7x FY27E EPS
Recommendation: BUY

The stock’s current levels present a compelling entry point, with the target price implying a potential upside of approximately 15%. The valuation is supported by resilient earnings, robust return ratios, and a strong order book.

Quarterly Performance: Navigating a Challenging Environment

Revenue Miss Amid Macro Headwinds
TCS reported Q1FY26 revenue of $7,421 million, down 0.6% quarter-on-quarter (q-o-q) and 1.1% year-on-year (y-o-y), falling short of estimates. In rupee terms, revenue stood at Rs 63,437 crore, down 1.6% q-o-q but up 1.3% y-o-y. The primary drag stemmed from the sharp ramp-down of the BSNL deal and cautious discretionary spending by global clients.

Margin Expansion Defies Revenue Weakness
Despite the top-line pressure, EBIT margin improved by ~30 basis points q-o-q to 24.5%, surpassing expectations. This was achieved through superior revenue quality, reduced third-party expenses, and favorable currency movements.

Record Deal Wins Signal Underlying Strength
Deal win total contract value (TCV) soared to $9.4 billion, up 13.2% y-o-y, with a book-to-bill ratio of 1.3x. North America contributed $4.4 billion, while BFSI and Consumer Business verticals secured $2.5 billion and $1.6 billion, respectively.

Financial Snapshot and Valuation Metrics

Below is a summary of key financial metrics and valuation levels for TCS:

These figures highlight TCS’s consistent profitability, industry-leading return ratios, and prudent capital allocation.

Operational Highlights and Sectoral Insights

Order Book and Pipeline Remain Robust
TCS’s order book stands at a formidable $39.4 billion, with a healthy pipeline in North America and Europe. The company is well-positioned to capitalize on opportunities in AI, cloud, and digital transformation.

Vertical and Geographic Performance

Technology and Services: +1.1% q-o-q

Manufacturing: +0.2% q-o-q

BFSI: -0.5% q-o-q

Consumer Business: -2.2% q-o-q

Life Sciences & Healthcare: -1.2% q-o-q

Communication Media: -3.1% q-o-q

Energy, Resources & Utilities: -0.6% q-o-q

Geographically, North America was flat, while UK and Europe saw mild declines. India experienced a sharp 32.6% sequential drop, reflecting the BSNL deal taper.

Headcount and Attrition
Net headcount additions were 5,090, bringing the total to 613,069. However, LTM attrition edged up to 13.8%, exceeding the company’s comfort range.

Management Commentary and Strategic Outlook

Focus on Margin Stability and High-Value Deals
Management remains optimistic about international revenue recovery in FY26, citing robust customer conversations and a diversified order book. The company is targeting an operating margin band of 26-28%, supported by a pivot towards high-value AI and cloud engagements.

Cost Optimization and Talent Development
TCS is actively managing employee costs, which constitute approximately 47% of revenue, and is investing in upskilling talent for emerging technologies.

Risks and Recovery Timeline
Key risks include rupee appreciation, adverse cross-currency movements, and a potential recession in the U.S. While recovery timelines remain uncertain, management anticipates clarity by late July or early August 2025.

Shareholding Structure and Market Position

The promoter holding remains robust, underlining confidence in the company’s long-term prospects.

Bottomline: Investment Rationale and Actionable Levels

TCS’s near-term revenue headwinds are offset by its margin resilience, strong deal wins, and leadership in digital transformation. Mirae Asset Sharekhan’s BUY call and target price of Rs 3,900 reflect conviction in the company’s ability to deliver superior returns as macro conditions stabilize. Investors are advised to accumulate the stock at current levels, with a medium- to long-term horizon, while monitoring execution on high-value deals and margin sustainability.

For those seeking exposure to India’s IT sector leader, TCS remains a cornerstone holding, offering a blend of stability, growth, and innovation-driven upside.