Estimates by the Tata Consultancy Services ( TCS) leadership that FY26 revenues will exceed those of the financial year gone by - and without margin erosion - are prompting several analysts tracking the outsourcing bellwether to conclude the current tariffs-triggered turmoil will be short lived, causing only minimal damage to India's biggest forex earner.
While the IT major started the year by missing analysts’ estimates, TCS’s revival in the core region of North America after two quarters and uptick in the largest vertical banking, financial services (BFS) minus insurance could place the company better than its peers, analysts said.
“Despite facing multiple challenges such as global economic uncertainties, federal budget cuts, reduced discretionary spending, and heightened global competition, TCS effectively managed its financial situation,” said Biswajit Maity, senior principal analyst at Gartner.
The TCS management expects manufacturing, excluding automotive, and banking, financial services and insurance (BFSI) to continue to do well based on client conversations. It also expects retail, consumer packaged goods (CPG), travel and auto verticals to be impacted the most from the tariffs, which are now on a 90-day pause for most geographies.
On Friday, the TCS stock opened in green to rise by 1.6% during the day but closed weaker at Rs 3232.30 per share. However, it ended 0.43% weaker on a strong 1.77% high BSE Sensex.
Wall of worry
On a year-on-year (YoY) basis, TCS revenue grew 5.3% for the January to March quarter largely fuelled by growth in the energy, resources and utilities, manufacturing, consumer business industry vertical, and regional markets. Besides India degrowth due to ramp-down of its mega government deal BSNL, its international business grew sequentially.
During the fourth and last quarter of FY25, the Mumbai-headquartered IT major crawled its way to the $ 30.18 billion revenue milestone for the full fiscal year growing by 3.8% and 4.2% adjusting for currency fluctuation. Its quarterly revenue remained flat or weaker while profits fell both on a YoY and sequential basis to Rs 12,224 crore.
The company also increased its employee strength although marginally, indicating a potential uptick in business demand. Even as it has delayed the wage-hike cycle, TCS hired 42,000 freshers from April to March and plans to hire a similar or higher number in FY26 exuding business confidence. Further, even as the margins contracted by 0.3% to 24.2%, its guidance of 26-28% remained unchanged.
To be sure, analysts do not share the same level of confidence as TCS.
“Despite macroeconomic uncertainties and the BSNL deal ramp-down, management is hopeful of FY26 revenue growth being better than in FY25. While we do not share a similar level of optimism, we do see TCS as having among the best risk-reward profiles in our large cap-coverage with an attractive dividend backstop,” said Kumar Rakesh, IT analyst at BNP Paribas, in a report.
Deal pipeline
Even as TCS did not sign any mega deals, its deal bookings improved to $12.2 billion largely coming from its key region of North America and segments BFSI and retail. Further, while some deal closures were delayed due to the tariff-related uncertainty, TCS did not see any cancellations in AI-led projects.
“TCS has won $82 billion of TCV (total contract value) in the past two years at a book-to-bill of 1.4x, which improves its revenue visibility substantially, in our view,” said Abhishek Kumar and Nandan Arekal, IT analysts at JM Financial.
A report by brokerage firm Nuvama (formerly Edelweiss) institutional equities, noted, “We expect the demand environment to remain challenging for the next one–two quarters due to macro uncertainty. But we remain positive on a medium-to-long term outlook as technology debt continues to be very high for enterprises, which will warrant revival in spending as macro improves.”
While the IT major started the year by missing analysts’ estimates, TCS’s revival in the core region of North America after two quarters and uptick in the largest vertical banking, financial services (BFS) minus insurance could place the company better than its peers, analysts said.
“Despite facing multiple challenges such as global economic uncertainties, federal budget cuts, reduced discretionary spending, and heightened global competition, TCS effectively managed its financial situation,” said Biswajit Maity, senior principal analyst at Gartner.
The TCS management expects manufacturing, excluding automotive, and banking, financial services and insurance (BFSI) to continue to do well based on client conversations. It also expects retail, consumer packaged goods (CPG), travel and auto verticals to be impacted the most from the tariffs, which are now on a 90-day pause for most geographies.
On Friday, the TCS stock opened in green to rise by 1.6% during the day but closed weaker at Rs 3232.30 per share. However, it ended 0.43% weaker on a strong 1.77% high BSE Sensex.
Wall of worry
On a year-on-year (YoY) basis, TCS revenue grew 5.3% for the January to March quarter largely fuelled by growth in the energy, resources and utilities, manufacturing, consumer business industry vertical, and regional markets. Besides India degrowth due to ramp-down of its mega government deal BSNL, its international business grew sequentially.
During the fourth and last quarter of FY25, the Mumbai-headquartered IT major crawled its way to the $ 30.18 billion revenue milestone for the full fiscal year growing by 3.8% and 4.2% adjusting for currency fluctuation. Its quarterly revenue remained flat or weaker while profits fell both on a YoY and sequential basis to Rs 12,224 crore.
The company also increased its employee strength although marginally, indicating a potential uptick in business demand. Even as it has delayed the wage-hike cycle, TCS hired 42,000 freshers from April to March and plans to hire a similar or higher number in FY26 exuding business confidence. Further, even as the margins contracted by 0.3% to 24.2%, its guidance of 26-28% remained unchanged.
To be sure, analysts do not share the same level of confidence as TCS.
“Despite macroeconomic uncertainties and the BSNL deal ramp-down, management is hopeful of FY26 revenue growth being better than in FY25. While we do not share a similar level of optimism, we do see TCS as having among the best risk-reward profiles in our large cap-coverage with an attractive dividend backstop,” said Kumar Rakesh, IT analyst at BNP Paribas, in a report.
Deal pipeline
Even as TCS did not sign any mega deals, its deal bookings improved to $12.2 billion largely coming from its key region of North America and segments BFSI and retail. Further, while some deal closures were delayed due to the tariff-related uncertainty, TCS did not see any cancellations in AI-led projects.
“TCS has won $82 billion of TCV (total contract value) in the past two years at a book-to-bill of 1.4x, which improves its revenue visibility substantially, in our view,” said Abhishek Kumar and Nandan Arekal, IT analysts at JM Financial.
A report by brokerage firm Nuvama (formerly Edelweiss) institutional equities, noted, “We expect the demand environment to remain challenging for the next one–two quarters due to macro uncertainty. But we remain positive on a medium-to-long term outlook as technology debt continues to be very high for enterprises, which will warrant revival in spending as macro improves.”
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