For IT giant Tata Consultancy Services Ltd (TCS), the March quarter (Q4FY26) marked the third straight quarter of sequential revenue growth. Sequential constant currency (CC) revenue rose 1.2%, slightly above Bloomberg’s 1% estimate.
Growth was broad-based across key geographies and segments, except BFSI (banking, financial services and insurance) and CMT (communication, media and technology).
Even so, investor sentiment remains fragile. Fears of AI-led deflation, the recent new product launch by Anthropic, and geopolitical tensions have weighed on IT stocks. TCS shares slipped another 3% on NSE in early trade on Friday.
TCS exited FY26 with CC revenue down 2.4% year-on-year, reflecting muted international business and continued client caution. Weak organic growth remains a key irritant.
“FY26 was an exceptionally weak year for TCS from a growth perspective, but with solid margins and a stable deal-win showing,” said a Nuvama Research report dated 9 April.
Deal momentum
Management expects international revenue growth to be higher in FY27 versus FY26, aided by a strong pipeline and recent wins.
Total contract value (TCV) stood at $12 billion in Q4FY26, up 29% sequentially, taking FY26 TCV to $40.7 billion versus $39.3 billion in FY25. The order pipeline continues to be driven by vendor consolidation deals, with the order book mix at 55:45 between renewals and new programmes.
Nuvama expects growth to recover over the next few quarters as TCS regains lost ground, contingent on macro conditions and generative AI trends gradually turning favourable.
TCS said AI projects are moving from ‘proof of concepts’ to ‘large projects’. AI now accounts for about 8% of revenue, or roughly $2.3 billion annualized. The company expects AI revenue to grow faster over time, helping offset structural decline in traditional services.
TCS anticipates a return to normal seasonality in FY27, with stronger sequential growth in the first half than the second, backed by strong client engagement, a healthy order book and strategic AI investments.
Macro risks
That said, management flagged risks from any sharp macro deterioration or second-order impact of a prolonged West Asia war. Geopolitical conflicts are directly affecting travel and transportation, while delaying decisions in key verticals such as BFSI.
The BFSI vertical reported 2.9% growth in USD in FY26, which could create a headwind in FY27, cautioned PL Capital. In this segment, client spending remained technology-led and outcome-focused, management said.
Margin cushion
Q4FY26 Ebit margin came in at 25.3%, an eight-quarter high, up 10 basis points sequentially. Gains from better realizations and currency tailwinds were largely reinvested in capability building, in line with TCS’s build-partner-acquire strategy.
Salary hikes rolled out from April are expected to dent Q1FY27 margins by 150–200 bps. For FY26, Ebit margin improved to 25% from 24.3% in FY25. TCS reiterated its long-term Ebit margin aspiration of 26%.
Some brokerages have marginally raised EPS estimates post Q4. However, confidence in the sector remains weak. TCS stock is down 22% so far in 2026, underperforming the Nifty IT index, and trades at a FY28 price-to-earnings multiple of 15.35x, according to Bloomberg data.