Motilal Oswal has maintained a 'Buy' rating on Tata Consultancy Services with a target of INR 2,400 after its second-quarter results. While the company reported steady profit growth and strong deal wins, the operating margin missed the brokerage's expectations.
Motilal Oswal has upheld its 'Buy' rating on Tata Consultancy Services, setting a target price of INR 2,400 per share. This update follows the company's second-quarter results for the 2027 fiscal year, where it reported a net profit of INR 13,884 crore, representing a 15% increase compared to the same period last year. Revenue for the quarter reached USD 7.6 billion, showing a modest growth of 0.5% in constant currency terms.
Order Book and AI Growth
The brokerage's optimistic outlook is supported by a robust deal pipeline. TCS secured a Total Contract Value of USD 9.6 billion during the quarter, indicating strong client demand despite the challenging global economic climate. A notable driver for the company is its investment in artificial intelligence services, which now account for more than 10% of its total revenue. Analysts noted that this shift toward AI-led services is becoming a crucial part of the company's growth strategy, helping it secure long-term contracts.
Profitability and Margin Pressures
While the top-line performance remains resilient, investors are paying close attention to operational efficiency. The company’s operating margin stood at 24% for the quarter. This figure slightly missed the 25% expectation set by Motilal Oswal, highlighting ongoing pressure on profitability. For shareholders, this means that while revenue and deal wins are healthy, the company's ability to improve these margins will be a key factor in future performance.
Risks and Outlook
The brokerage highlighted several risks that could affect the stock, including broader global economic uncertainty that might lead clients to delay spending or focus only on smaller, cost-saving projects. There is also a concern regarding the transition toward newer technology services; analysts are monitoring whether these new AI-driven lines add incremental value or simply replace older, traditional business segments. Additionally, the company declared a dividend of INR 12 per share for its shareholders.
Looking ahead, market participants will monitor whether TCS can improve its operating margins toward the 25% level and how effectively it can scale its AI-led service offerings. The consistency of its deal-win momentum will also be a primary metric for investors to watch in the coming quarters.