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TCS shares surged 4% after Q1 FY27 results as strong AI revenue growth, healthy deal wins and optimistic management commentary boosted investor sentiment. Here's what brokerages recommend.
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Rudransh Sangwan
Shares of Tata Consultancy Services (TCS) surged nearly 4% on Friday after the IT giant reported better-than-expected Q1 FY27 earnings. Strong AI revenue growth, healthy deal wins, and optimistic management commentary improved investor sentiment, while most brokerages maintained positive ratings despite ongoing concerns over AI-led pricing pressure and global demand.
Tata Consultancy Services (TCS) shares gained as much as 4% during Friday's trading session after the company announced its June quarter (Q1 FY27) results, which broadly met market expectations.
At around 10:15 AM, the stock was trading near ₹2,122, although it remains down more than 30% year-to-date, reflecting the broader weakness in India's IT sector.
The country's largest IT services company delivered steady operational performance despite a challenging macroeconomic environment.
| Particulars | Q1 FY27 |
|---|---|
| Net Profit | ₹13,349 crore |
| Revenue | ₹72,275 crore |
| Constant Currency Revenue Growth (QoQ) | 0.4% |
| Interim Dividend | ₹12 per share |
| AI Revenue Run Rate | $2.6 billion |
| AI Revenue Growth (QoQ) | 13.6% |
| AI Contribution to Revenue | 8.5% |
The company also reported an exceptional loss of ₹668 crore related to legal settlements. Excluding this one-time item, adjusted earnings came in above market expectations.
TCS reported a 130 basis point sequential decline in operating margins, largely due to annual salary revisions.
The decline was largely in line with analyst expectations, as most brokerages had anticipated wage hikes to weigh on profitability during the quarter.
Artificial Intelligence remained one of the biggest growth drivers for TCS.
The company reported:
Management also noted that AI continues to generate incremental opportunities despite productivity-driven pricing pressure.
Most analysts retained positive ratings on the stock following the quarterly results.
JPMorgan said the results matched its revised expectations, supported by a strong India business.
The brokerage believes TCS can deliver 2.5%–3% constant currency growth over the coming quarters and sees attractive valuation after the sharp correction.
Motilal Oswal expects:
While the brokerage remains cautious about long-term AI-led pricing pressure, it believes downside risks for the stock remain limited following the recent correction.
Morgan Stanley believes stronger-than-feared Q2 commentary could improve sentiment but remains cautious due to:
Management acknowledged that clients are increasingly demanding productivity gains through AI, with nearly 10%–15% of productivity benefits being passed on during contract renewals.
However, TCS indicated that additional AI-related projects and new digital transformation work have so far offset most of the revenue impact.
Brokerages believe the full impact of AI-led pricing pressure will unfold gradually over the next few quarters.
According to Bloomberg consensus data:
| Recommendation | Number of Analysts |
|---|---|
| Buy | 33 |
| Hold | 12 |
| Sell | 6 |
| Total Coverage | 51 |
Around 65% of analysts covering the stock continue to recommend Buy.
The average consensus target price indicates an upside potential of nearly 23% from current levels.
TCS shares gained after the company reported Q1 FY27 earnings that met or slightly exceeded expectations, along with strong AI revenue growth and positive management commentary.
The company declared an interim dividend of ₹12 per equity share for FY27.
TCS reported an annualised AI revenue run rate of $2.6 billion, representing approximately 8.5% of total revenue.
Out of 51 analysts tracking the stock, 33 recommend Buy, representing nearly 65% of total coverage.