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TCS in Q2 reported revenue of US$7,642 mn,

ICICIdirect Research 09 Oct 2026 DISCLAIMER

News: TCS in Q2 reported revenue of US$7,642 mn, up 0.24% QoQ/2.4% YoY and ₹73,188 crore, up 1.3% QoQ/11.2% YoY (in CC terms +0.5% QoQ/+2.8% YoY). Notably, International Revenue grew 1.2% QoQ in CC terms. Annualized AI services revenue was US$3.1 bn in Q2, up 19.2% QoQ (implying ~10% of revenue mix). Geography wise on YoY CC basis all regions grew positively with its largest geo North America (48.3% of the mix) growing 1.5%. Vertical wise in YoY CC terms growth was broad based with the exception of Consumer Business (15% of the mix) which declined by 1% due to inflation and higher energy costs. EBIT margin stood at 24%, broadly stable QoQ, as higher subcontracting costs, investments in strategic partnerships/M&A and niche talent, and a higher bench to build future capacity were offset by currency gains and operating leverage. Adjusted PAT (after exceptional items) stood at ₹13,884 crore, up 4% QoQ/18% YoY. The company recorded TCV of US$9.6 bn (+1.1% QoQ/-4% YoY), excluding the Porsche and Best Buy deals, which represent a new category of transformation partnerships. The company added 4,258 employees taking total headcount to 5,98,056 while LTM attrition stood at 13.2%, down 30 bps QoQ. The company declared an interim dividend of ₹12 per share.

View: TCS delivered a modestly better quarter with broad-based international growth; however, underlying demand remains selective, with management noting that discretionary programs without near-term value continue to face scrutiny. While AI revenues crossed US$3.1bn and are growing strongly, management indicated that AI-led productivity/deflation has not yet been fully offset by incremental AI spending, suggesting limited near-term acceleration in overall growth. Further, 24% EBIT margin remains well below the 26–28% long-term aspiration, with higher subcontracting, elevated investments and a higher bench weighing on profitability. Management also flagged ~50bps dilution from MHP aquisition in H2FY27, along with furlough seasonality and ecosystem investments, making the path towards the earlier 25%+ exit margin target more challenging. Overall, we remain cautious as improving AI-led opportunities are yet to translate into a meaningful inflection in topline growth, while near-term margin recovery is likely to remain gradual. 

Impact: Neutral

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