TCS Q2 Results: IT services giant (TCS) saw its share price climb almost 5% on Friday, October 9, after reporting a 15% year-on-year (YoY) increase in consolidated net profit for the July-September quarter of FY27. The company posted a net profit of ₹13,884 crore, up from ₹12,075 crore in the corresponding quarter last year.
The company’s board also announced a second interim dividend of ₹12 per share for the financial year 2026-27.
TCS reported revenue from operations of ₹73,188 crore for the quarter, marking an 11% rise from ₹65,799 crore recorded in the year-ago period.
On a constant currency basis, revenue grew 0.5% sequentially. The IT major reported an operating margin of 24% and a net margin of 19% during the quarter.
The stock rose as much as 4.7% to day’s high of ₹2,173.55 per share on BSE.
CEO highlights growth across markets and industries
TCS managing director and chief executive officer K Krithivasan said the company recorded broad-based growth across international markets and most industry verticals during the quarter.
He also highlighted the company’s engagements with Porsche and Best Buy, describing them as a new category of transformation partnerships. According to Krithivasan, TCS is working with clients to develop repeatable platforms that can help scale the deployment of artificial intelligence (AI) across businesses.
AI revenue crosses 10% of total revenue
TCS continued to see strong traction in its AI business, with annualised AI revenue reaching $3.1 billion in the second quarter of FY27, accounting for more than 10% of the company’s revenue. The company recently agreed to take over Best Buy’s India global capability centre and signed a €1.25 billion deal with Porsche AG in August to deploy AI and acquire its consulting unit. It also launched AI-focused engineering facilities in Pune and Bengaluru, including a lab powered by NVIDIA.
Aarthi Subramanian, executive director, president and chief operating officer at TCS, said demand remained robust across several AI-related offerings. These included AI-native solutions, AI-driven enterprise transformation, autonomous global business services and cybersecurity.
The company’s commentary highlighted the growing role of AI in its business strategy, as it seeks to help clients integrate the technology into enterprise operations and scale its adoption across functions.
TCS responds to US green card programme suspension
The results came amid a US government move to suspend several large technology companies from the Permanent Labour Certification (PERM) programme, which enables employers to sponsor eligible foreign workers for employment-based permanent residency.
TCS said it would comply with any directives from the US Department of Labour, highlighting its local hiring strategy and presence across 31 offices and delivery centres in the country.
“We intend to hire an additional 15,000 people in the US over the next five years, to further augment our local workforce,” the company said.
TCS added that its PERM applications had been in single digits over the preceding two years and said it did not expect the suspension to affect its workforce strategy or customer engagements.
Should you buy?
Brokerages remained divided on TCS after its Q2 results, weighing growth prospects against near-term margin pressures and challenges in accelerating revenue growth.
Emkay retained an add call with a target price of ₹2,600 with upside potential of 20%.
“TCS continues to strengthen capabilities through acquisitions and investments in frontier AI partnerships, talent, and new growth engines such as data center services, GCCs, mid-market, and sovereign cloud, which would weigh on margin in the near term. The management retains its long-term aspirational margin range of 26-28%, factoring in anticipated gains from growing share of AI revenue, which operates at better margins, an uptick in revenue growth driving operating leverage, and cost optimization. We cut earnings estimates by 0.6% to 1.6% for FY27-29, factoring in 2Q performance, lower margin assumptions, and M&As (Best Buy’s India GCC and MHP),” said the brokerage.
Meanwhile, BOB Capital raised the stock to a HOLD from Sell post the Q2 results due to price correction. It also raised its target price to ₹2015, a decline of 3% from October 8 closing price. The brokerage noted that TCS’ revenue was broadly in line with the international business growing. However, it noted that the margin came in a bit weak, and management commentary indicates focus on growth.
“We think it will struggle for growth due to its large legacy book. Unless it decides to step away from its 26-28% aspirational margins. This quarter’s move by TCS on margin could lead to struggle for market share to intensify amongst incumbents, which is likely to lower margins for all,” it said.
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