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TCS Q2FY27 – Steady state, growth remains elusive

ICICIdirect Research 09 Oct 2026 DISCLAIMER

Revenue growth remained modest as TCS reported revenue of 0.5% QoQ and 2.8% YoY in CC terms. North America, the largest market, grew a modest 0.4% QoQ indicating that meaningful acceleration in core demand is yet to emerge. The silver lining was that annualized AI revenues rose 19.2% QoQ to US$3.1bn, crossing 10% of revenue. However, management noted that discretionary projects without near-term value remain under scrutiny, while AI-led productivity gains are not yet fully offset by incremental opportunities, suggesting that the rising AI revenue pool may take time to translate into a meaningful acceleration in overall company growth.
On the margins front, EBIT margin was stable at 24%, despite higher subcontracting costs, increased bench strength and investments in strategic partnerships, M&A and niche talent. Management flagged ~50bps of margin dilution from the proposed MHP acquisition in H2FY27, alongside normal furlough seasonality and continued ecosystem investments, implying that near-term improvement is likely to be minimal with management prioritising growth investments.
Thus, while the AI momentum continues to remain strong, we believe growth visibility is still elusive with a long path ahead for meaningful growth recovery trajectory. Hence, we maintain HOLD rating with target price of ₹2,050 at 13x P/E on FY28E EPS.

IT News flows: US PERM suspension for major IT firms raises longer-term talent retention concerns
The US administration has suspended Microsoft, Adobe and six major IT companies including TCS, Infosys, Cognizant, Wipro, HCLTech and Capgemini from the PERM (Permanent Labor Certification) programme, which is a key step for employment-based green-card sponsorship.
We believe this is only sentimentally negative for Indian IT stocks, primarily through longer-term talent-retention concerns rather than an immediate revenue impact. Importantly, Indian IT companies have very limited PERM dependence, accounting for less than 2% of the 117,849 applications filed between October 2024 and September 2025; Infosys had no PERM cases since 2022, while Wipro, TCS and HCLTech received only 523, 513 and 393 permanent-residency approvals, respectively. 

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