Tata Consultancy Services (TCS) nosedived by nearly 3% on Friday after posting disappointing Q1FY26 earnings. Currently, the largest IT stock of India, traded near its intraday low. However, despite weak Q1, the majority of brokerages have recommended buying TCS shares. The next key focus is on TCS's upcoming dividend of Rs 11 per share.
TCS Share Price:
At the time of writing, TCS stock traded at Rs 3286.60 apiece on BSE, down by 2.8% with a market cap of Rs 11,89,120.64 crore.
In the early trade, TCS shares crashed by 2.95% by hitting an intraday low of Rs 3282.30 apiece. Following this, TCS lost at least Rs 36,100.49 crore market value so far on July 10, to Rs 11,87,645.24 crore, compared to the m-cap of Rs 12,23,745.74 crore in the previous day.
Why TCS Shares Are Free-Falling?
"TCS' 1QFY26 revenues declined 3.3% cc QoQ, missing estimates (JMFe: -0.6%). BSNL ramp-down contributed 85% (-2.8%) of the decline, explaining the majority of the miss. International business, albeit down 0.5% cc QoQ, was steady, given the environment. Deal wins (USD 9.4bn; book-to-bill: 1.3x) remained a bright spot. That said, strong deals in the recent past (LTM book-to-bill: 1.3x) have not translated into growth, implying weak revenue conversion - a key investor concern," said JM Financial in its note.
Further, TCS management attributes this to a combination of factors - pauses, rescoping, tenure extension etc. Decline of USD 50mn+ clients by 9 (6% of base) in the past four quarters - highest ever - which suggests the challenge is secular. Also, client-specific, such as Deutsche Bank decline, might be impacting too.
In Q1FY26, TCS logged consolidated net profit of Rs 12,760 crore, which was up by 5.98% YoY and 4.38% QoQ. However, the top-line front dipped steeper than expected. TCS revenue stood at Rs 63,437 crore, registering a decline of 1.6% QoQ but up 1.3% YoY. In constant currency, the revenue declined 3.1% YoY.
Revenue growth dipped by 3.1% in consumer business, 9.6% in life sciences & healthcare, 4% in manufacturing, and by 9,6% in communication & media. On a geographical basis, India's business declined by 21.7%, followed by a 2.7% decline in North America as tensions over the US tariff loom.
Why Brokerages Still Recommend Buying TCS?
Motilal Oswal On TCS:
Given its size, order book, and exposure to long-duration orders and portfolio, TCS is well-positioned to grow over the medium term. Owing to its steadfast market leadership position and best-in-class execution, the company has been able to sustain its industry-leading margin and demonstrate superior return ratios.
"Our TP of INR3,850 implies 25x FY27 EPS (unchanged), with a 14% upside potential. We reiterate our BUY rating," it said.
Choice Institutional Equities On TCS:
TCS remains optimistic about international revenue growth. While short-term macro concerns may impact H1FY26, its strong project pipeline, existing capacity, and continued investments in technology position it well for future success. As macro conditions stabilize, TCS is expected to deliver strong long-term performance driven by sustained demand and strategic preparedness as it continues to stay ahead in the technology led revolution.
"We expect the macro demand environment to improve gradually & anticipate Q2FY26 to be better than Q1FY26. Thus, we have introduced FY28E and expect Revenue/ EBIT/ PAT to grow at a CAGR of 6.5%/ 9.6%/ 9.4%, respectively, over FY25-FY28E and maintain our 'BUY' rating and target price of INR3,950, which implies a PE multiple of 24x (maintained) based on the average of FY27E & FY28E EPS of INR164.6," said Choice's note.
JM Financial On TCS:
Understandably, investors worry that TCS is losing wallet share to competition. We differ though. The panacea for all these - growth, wallet share gains - remains TCV, which TCS continues to win. Also, it is improbable that TCS is winning new deals but is unable to retain its current book of business. After all, similar pricing/deal construct should apply to renewal as well as new scope.
It added, "We therefore believe TCS' growth should improve once macro uncertainty lifts. That, along with undemanding valuation (22x FY27E), underpin our constructive view. BUY with a revised TP of INR 3,950."
TCS Interim Dividend 2025:
The heavyweight tech player has declared an interim dividend of Rs 11 per Equity Share of Rs 1 each. Further, TCS said that the interim dividend shall be paid on Monday, August 4, 2025, to the equity shareholders of the Company whose names appear on the Register of Members of the Company or in the records of the Depositories as beneficial owners of the shares as on Wednesday, July 16, 2025, which is the Record Date, fixed for the purpose.
This Tata tech giant holds a strong record of dividend payout. Since October 2004, the company has delivered 90 dividends, as per Trendlyne data. In the past 12 months, the company has paid up to Rs 126 per share. Its current dividend yield is 3.72%.
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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