TCS Q4 Results: Emkay Recommends 'ADD' With Revised Target Of Rs 3,500 - Here’s Why

Tata Consultancy Services ( TCS ) announced its Q4FY25 results, reporting a 1.1% decline in revenue compared to the previous quarter, slightly below analyst expectations. 
Emkay, in its report, noted that the dip was primarily due to project deferrals and heightened uncertainty affecting decision-making processes towards the end of the quarter.

Market Analysts' Recommendation
Despite the subdued performance, Emkay has reaffirmed its 'ADD' rating on TCS with a revised target price of Rs 3,500. The brokerage firm adjusted its target down by approximately 10% citing macroeconomic uncertainties and a margin miss in Q4FY25.

TCS Q4 Results FY25
The company revenue dipped 1.0% QoQ (-0.8% QoQ cc) to USD7.47bn. EBITM fell by 30bps QoQ to 24.2%, short of our estimate of 25.0%. Margin decline was due to tactical interventions (-100bps) driven by promotions wef Jan, strategic marketing, CSR and travel (-60bps), offset by currency gains (+40bps) and operating efficiencies.

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TCS reported a notable deal intake of USD 12.2 billion during Q4FY25, with a book-to-bill ratio of approximately 1.6x. The company highlighted growth in international markets despite challenges, attributing the lower-than-expected growth to tariff uncertainties impacting decision timelines. 

‘EBITM declined by 30bps to 24.2%, lower than estimate. In the absence of mega deals, deal TCV was impressive at USD12.2bn in Q4 (book-to-bill: ~1.6x),’ as mentioned in the report. 

The company has also announced a dividend of Rs30/sh. 

Strategic Leadership Changes and Sectoral Performance
During the earnings call, TCS announced key leadership appointments and discussed sector-specific challenges and opportunities. The BFSI sector showed resilience, while sectors like consumer and manufacturing faced pressures amidst industry-wide challenges and economic uncertainties.
 

Future Outlook and Guidance
TCS anticipates improved margins in FY26 driven by business mix optimizations, productivity enhancements, and better utilization. The company plans to decide on FY26 wage hikes based on prevailing market conditions closer to the fiscal year.

‘We retain ADD while cutting our TP by ~10% to Rs3,500 at 23x Mar-27E EPS (25x earlier),’ as mentioned in the report by Emkay. 
 
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