Tata Consultancy Services (TCS) shares climbed nearly 5% after the company reported a 15% increase in net profit for the second quarter of FY27. Following the results, brokerage firm Anand Rathi initiated coverage with a target price of ₹2,430, pointing to robust artificial intelligence revenue and a healthy deal pipeline. Investors are now weighing this growth potential against sluggish demand in key markets like North America and India.
Tata Consultancy Services (TCS) saw its share price jump nearly 5% on October 9, 2026, following the release of its financial results for the second quarter of the 2027 fiscal year. Alongside the positive market reaction, brokerage firm Anand Rathi initiated a 'Buy' rating on the stock, setting a price target of ₹2,430. This target suggests an estimated 17% upside from current levels, based on the firm's projections for earnings growth through 2029.
Earnings Performance and AI Growth
The company reported a strong set of numbers, with a consolidated net profit of ₹13,884 crore, marking a 15% increase compared to the same period last year. Revenue for the quarter rose to ₹73,188 crore, an 11.2% increase year-over-year. A key driver for this performance has been the firm's successful push into artificial intelligence. Annualised revenue from AI services has reached $3.1 billion, now accounting for over 10% of the company's total revenue. Furthermore, the company reported a total contract value of $9.6 billion, which provides visibility into future business bookings.
Market Challenges and Margin Pressure
Despite the growth in AI and overall contract wins, the company faces some hurdles. The domestic market in India saw a decline of 10.3%, largely due to project delays. Additionally, demand in the North American market—a crucial region for the IT sector—remains soft. Clients continue to scrutinize their spending on optional projects, leading to a selective and uneven demand environment.
Profit margins remained steady at 24.0% for the quarter. However, the company faces pressure on its operating margins due to rising costs associated with subcontracting and investments in strategic partnerships. While the brokerage projects a 6% compound annual growth rate in earnings per share through FY29, future margin expansion could be limited by these ongoing expenses and seasonal changes in employee utilization.
In addition to the financial updates, the company declared a second interim dividend of ₹12 per share, providing a steady return for shareholders. As investors look ahead, the main items to monitor will be the pace of demand recovery in North American and Indian markets, the company's ability to convert its $9.6 billion deal pipeline into actual revenue, and whether it can manage rising operational costs to keep profit margins stable.