A clean, in-line March quarter — 1.2% constant-currency revenue growth, 25.3% margins and a $12bn order book with three mega deals. JM Financial keeps its ADD and nudges the target to ₹2,730, but flags the one thing that could keep the stock from re-rating: the Gen AI overhang.
Tata Consultancy Services closed out FY26 with the kind of quarter that doesn’t move the needle dramatically but quietly rebuilds confidence. Revenue, margins and profit all landed broadly where the Street expected, and the order book came in strong. JM Financial, which reviewed the print, kept its ADD rating and lifted its 12-month target to ₹2,730 from ₹2,660 — a modest 5.4% upside from the current Rs 2,589.
The headline JM Financial chose says it plainly: “4Q Results: Inline Performance; Outlook Unchanged.” But beneath the calm, the forward indicators are the real story.
The Quarter: Steady, Not Spectacular
Revenue grew 1.2% QoQ in constant-currency terms — a touch ahead of the 1% the Street penciled in — taking the top line to USD 7,621mn. EBIT margin held at 25.3%, up 10bps sequentially and 110bps YoY, helped by better realisation and a currency tailwind, partly offset by investments in consultants, partnerships and go-to-market. Reported PAT came in at ₹137bn.
Crucially, this was TCS’s third consecutive quarter of sequential growth. Growth was led by Energy & Utilities (+6.1%) and Consumer Business (+2.8%), while BFSI was broadly flat. By geography, the UK, India and North America did the heavy lifting.
The Order Book
This is where the quarter earns its optimism. The LTM order book grew 3.6% YoY heading into FY27 — a sharp reversal from the 8% decline it carried into FY26. Q4 total contract value landed at USD 12bn, including three mega deals, with full-year FY26 TCV at USD 40.7bn.
Management’s tone matched the numbers. As JM Financial relayed, the company is entering the year “with positivity and confidence,” underpinned by mega-deal wins and a broad-based recovery. The brokerage also noted early reassurance on demand, with “early signs of stabilization visible across key markets and client segments.”
The number that jumped out: annualised AI services revenue crossed USD 2.3bn in Q4, up roughly 30% sequentially from USD 1.8bn the prior quarter. Management framed enterprise AI as having moved “from experimentation to scaled deployment.” JM Financial captured the strategic upside crisply — TCS is “going back to clients with greater productivity and expansion in scope at the same time.”
The Gen AI Overhang
For all the steadiness, JM Financial is candid about what’s capping the stock. In its words, “sector rerating is unlikely to happen if concerns over the impact of Gen AI continues” — the same technology powering growth is also the one investors fear could deflate pricing. The brokerage notes that “INR depreciation is the only relief for Indian IT,” supporting margins near-term, even as April salary hikes threaten a 150–200bps margin hit.
TCS gave investors a quarter to exhale: growth is back, the pipeline is full, and management sounds genuinely upbeat for the first time in a while. But the valuation case stays measured — at 16x FY27 earnings with an ADD rating, JM Financial is signalling a quality compounder rather than a screaming re-rating candidate. The order book says FY27 should be better; whether the multiple follows depends on the market making peace with AI.