TCS Delivers Better-than-Expected Q2; Motilal Oswal Retains ‘Add’ Rating with ₹3,250 Target

Tata Consultancy Services (TCS) reported a better-than-expected operating performance in the September quarter (Q2 FY26), supported by broad-based growth and healthy deal wins, according to a research report by brokerage firm Motilal Oswal Financial Services.

The IT major’s revenue rose 0.6% sequentially in constant currency terms (0.8% CC) to US$ 7.47 billion, marginally above the brokerage’s estimate. International revenue grew at a similar pace, reflecting gradual recovery in key geographies.

Despite the wage hike impacting one month of the quarter, EBIT margin expanded by 70 basis points to 25.2%, aided by currency tailwinds and improved operational efficiency.

Outlook and Valuation

Motilal Oswal slightly adjusted its earnings estimates by -0.5% to +1.1% for FY26–28E to reflect the Q2 performance. The brokerage retained its ‘Add’ rating with a target price of Rs 3,250, valuing the stock at 21x September 2027 estimated EPS.

The report cited broad-based growth, margin expansion, and strong deal intake as positives, while noting continued weakness in the UK and consumer businesses as areas of concern.

Broad-Based growth across verticals

Motilal Oswal highlighted that growth was spread across key verticals — Life Sciences & Healthcare (up 3.4% QoQ in CC), Technology & Services (1.8%), Manufacturing (1.6%), and BFSI (1.1%). Regionally, North America and Continental Europe grew 0.8% and 1.4%, while India and the Middle East posted stronger gains of 4.0% and 5.9%, respectively. The UK business, however, declined 1.4%, reflecting ongoing softness in that market.

Also Read: TCS To Add 5,000 Jobs In UK And Opens London AI Experience Zone & Design Studio | Republic World

Healthy deal pipeline and strategic focus

Deal wins remained strong at US$ 10 billion (book-to-bill ratio of 1.3x), with management reaffirming that growth momentum in international markets would improve in the second half of FY26. The company continues to target its aspirational margin band of 26–28% and reiterated its ambition to emerge as the world’s largest AI-led technology services firm.

To that end, TCS announced plans to build a 1GW-capacity AI data centre in India over the next five to seven years on a co-location model. The company also acquired ListEngage to bolster its Salesforce capabilities, signalling renewed focus on inorganic expansion.

Workforce rationalization and dividend

The company’s headcount fell 3.2% QoQ to 593,314, as TCS released nearly 1% of its workforce—primarily mid- and senior-level employees with skill mismatches. Voluntary attrition stood at 13.3%, while an interim dividend of Rs 11 per share was announced.