TCS Share Price Target: Emkay Maintains ‘BUY’ Despite Weak Q1 - Here’s Why

Tata Consultancy Services (TCS) has reported a softer-than-expected performance for the first quarter of FY26, but Emkay Global Financial Services has retained its ‘BUY’ rating on the IT major with a target price of Rs 3,500.

The brokerage has marginally trimmed its earnings estimate by ~1.5% for FY27 and FY28 due to a revenue miss but remains optimistic about the long-term outlook, citing healthy deal wins, robust cash conversion, and increasing AI-led demand.

TCS Q1 Results FY25

TCS posted a 0.6% quarter-on-quarter (QoQ) decline in revenue to USD 7.42 billion (down 3.3% in constant currency), missing Emkay’s expectations.

This was largely impacted by the ramp-down of the BSNL deal, which alone contributed to a 2.8% drag on growth. Delayed decision-making and slower project commencements amid global macroeconomic uncertainty further weighed on the topline.

International revenue also slipped 0.5% QoQ in constant currency, while the India business plunged 31.4% QoQ in USD terms—again, primarily due to the BSNL impact.
“Revenue declined 0.6% QoQ (down 3.3% QoQ in CC) to USD 7.42bn, below our estimate, impacted by the ramp-down in BSNL deal, delays in decision-making and project commencement,” Emkay stated in its latest report.

Margin Resilience, Strong Deal Wins Offer Silver Lining
Despite the revenue miss, TCS managed to expand its EBIT margin (EBITM) by 30 basis points sequentially to 24.5%, slightly above estimates. This was supported by lower third-party expenses (+70bps) and favorable currency movements, partially offset by lower utilization rates. Cost of equipment and software licenses dropped by around USD 232 million QoQ, signaling a significant reduction in spending due to the BSNL ramp-down.

TCS announced an interim dividend of ₹11 per share and reported deal wins worth USD 9.4 billion in Q1, translating into a book-to-bill ratio of 1.3x—above its guided range of USD 7–9 billion per quarter.

“What we like: Strong deal intake, steady cash conversion. What we did not like: Revenue miss, weak revenue conversion,” Emkay noted in its assessment.

Sectoral Headwinds and Client Sentiment Remain Mixed
During the earnings call, TCS management acknowledged that many clients, particularly in BFSI, are cautious with new IT investments amid global uncertainty. Discretionary spends remain muted, especially in the US insurance sector, though Europe has shown relative strength. The consumer vertical continues to be the most impacted due to project delays and funding issues.

“Enterprises in CMT are re-evaluating their priorities with key focus on AI, automation, cost optimization, and vendor consolidation,” TCS highlighted. Manufacturing is also subdued, with Auto segment spending taking a hit. Meanwhile, ERU (Energy, Resources, and Utilities) investments are soft due to geopolitical risks and policy shifts.

AI-Led Transformation Emerges as Key Growth Engine
While near-term demand remains challenged, TCS is betting big on artificial intelligence as a long-term growth driver. The company is doubling down on AI-led business transformation, GenAI-enabled software development lifecycle (SDLC), and modernization of data platforms.

“Across industries, clients are increasingly shifting their focus from use case-based approach to RoI-led scaling of AI,” TCS said, adding that over 114,000 employees now possess higher-order AI skills.

The company is actively enhancing its AI platform—TCS WisdomNext—by integrating agentic AI capabilities, strengthening alliances with hyperscalers, and investing in AI infrastructure, agents, and business applications.

Hiring to Be Calibrated; Wage Hikes Under Review
TCS said it will recalibrate hiring based on the demand environment and has yet to finalize wage hikes for FY26. Headcount increased 0.8% QoQ to 613,069 in Q1FY26, while attrition inched up to 13.8% from 13.2% in Q4FY25.

TCS Share Price Target
Despite the Q1 disappointment, Emkay believes that TCS remains structurally strong and is well-positioned to benefit from digital transformation trends, particularly around AI. The brokerage has valued the stock at 23x Jun-27E EPS, translating to a target price of ₹3,500—representing modest upside from the current market price (CMP) of ₹3,382.
 

The management reiterated that international market revenue growth would be better in FY26 vs FY25 and highlighted that if macro improves with no further delays, Q2 could turn out better than Q1, Emkay concluded.

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