TCS share price targets amid Q2 beat, restructuring costs & AI data-centre push

Tata Consultancy Services Ltd (TCS) delivered a decent September-quarter performance amid low expectations, with revenue and margins (excluding one-off expenses) beating Street estimates, while profit was broadly in line with consensus. Stock analysts believe the stock looks attractive but they do not rule of near-term volatility. They are positive about TCS' data centre foray but said more clarity is awaited. 

"TCS has corrected sharply (25 per cent CYTD) and is now trading at a valuation of 20 times FY27E—in line with its historical multiple. While we expect near-term volatility to persist, the stock appears highly attractive from a medium to long-term perspective," Nuvama said as it cut its target to Rs 3,650 on the stock from Rs 3,950 earlier.

Biswajit Maity, Sr Principal Analyst at Gartner said TCS’s operating margin improved in Q2, demonstrating that while margin pressures remain, the company has achieved sequential progress through disciplined management and operational efficiency. 

"Overall, TCS has navigated its fiscal position effectively.  However, the recent QoQ increase in attrition rate could challenge TCS’s ability to uphold service quality and efficiently scale new projects if the trend continues,” Maity said.

Nomura lowered its FY26 EPS estimates by 2 per cent to factor in restructuring costs in 2H FY26F. It maintained its target price of Rs 3,300. "Our FY26-28F EPS are 2-5 per cent lower than Bloomberg consensus. Infosys (Buy) and Cognizant US (Buy) are our large-cap picks," it said.

Nirmal Bang Institutional Equities said TCS' strong deal pipeline, strategic investments in AI/Gen AI, leadership in cloud and cybersecurity, and new entry into the data center business position it well for long-term growth. 

But it remained cautious in the light of the global economic uncertainty and believe that discretionary spending will be dry for FY26. 

"We believe that during times of high volatility, the margin of safety remains high in TCS. Valuations too became lucrative at below 10-year mean. We upgrade TCS to ‘BUY’ and value it at an unchanged multiple of 23.8x on Sep-27E EPS for a target of Rs 3,861 against Rs 3,841 earlier," Nirmal Bang said.