Shares of Tata Consultancy Services (TCS) declined by over 2% on Friday after the company’s June quarter revenue fell short of market expectations, raising concerns about demand headwinds in the IT sector. The weak performance weighed on the broader IT pack, with peers Infosys, HCL Technologies, Wipro, Tech Mahindra, and others trading in the red. The weakness in the broader market further dampened sentiment, with the Sensex and the Nifty plummeting over 0.6% each. The Nifty IT index also dropped by as much as 1.4%, with most stocks floating in negative terrain.

Extending losses for the fifth consecutive session, shares of TCS opened 2% lower at ₹3,314 on the BSE, following a marginal 0.05% decline in the previous session ahead of its Q1 earnings announcement. In the first two hours of Friday’s trade, the IT major fell by as much as 2.45% to ₹3,299.20, dragging its market capitalisation below the ₹12 lakh crore mark.

TCS shares touched a 52-week high of ₹4,585.90 on September 2, 2024, and a 52-week low of ₹3,060.25 on April 7, 2025. The IT heavyweight has declined over 3% this week and nearly 5% over the past month. In the past one year, the Tata group major has dropped around 16%, and approximately 23% in the past six months, reflecting sustained pressure.

Q1 profit rises 6%, revenue up marginally by 1.3%

TCS has reported a 6% year-on-year increase in consolidated net profit for Q1FY26 at ₹12,760 crore, up from ₹12,040 crore in the corresponding period last year. The profit was driven by improved operational performance, strong deal wins, and a strategic shift towards AI-led solutions, even as global macroeconomic and geopolitical uncertainties persisted.

The quarterly revenue stood at ₹63,437 crore, marginally up 1.3% YoY, while it recorded a decline of 3.1% YoY in constant currency terms.

During the quarter under review, TCS saw its operating margin expand by 30 basis points sequentially to 24.5%. The company generated net cash from operations amounting to ₹12,804 crore, equivalent to 100.3% of its net income.

TCS also declared an interim dividend of ₹11 per share, with a record date of July 16, 2025, and a payment date set for August 4, 2025.

The IT major reported a total contract value (TCV) of $9.4 billion in Q1FY26, marking a 23% sequential decline but a 13.3% increase YoY.

Brokerage views on TCS Q1 results

According to domestic brokerage Motilal Oswal,  this was a “disappointing” quarter for TCS as it missed revenue estimates, mainly due to the BSNL ramp-down. International business also declined by 0.5%, underscoring an uncertain quarter marred by tariffs and other geopolitical uncertainties.

“The management retained its outlook of international doing better in FY26 (vs. 0% growth in FY25), though we bake in a modest 0.5-1% growth in international business in FY26,” it said.

The brokerage house has reiterated its ‘BUY’ rating, saying that TCS is well positioned to grow over the medium term due to its size, order book, and exposure to long-duration orders and portfolio.

JM Financial has also maintained a ‘BUY’ rating, citing that growth would improve once macroeconomic uncertainties ease. Despite near-term headwinds such as the BSNL deal impact and a still-challenging demand environment, it expects operating margins to improve going forward.

“Deal pipeline remains healthy too, though led by cost takeouts and vendor consolidation opportunities. Management indicated demand contraction through the quarter. Clients resorted to pauses, rescoping, tenure extensions and slower starts, driving weaker revenue conversion. That said, TCS has not seen project cancellations. TCS believes the impact of such delays is largely in the base and expects Q2 to be better than Q1. New BSNL contract ($340mn TCV) should help too, subject to purchase orders getting signed,” it said in a report.

In contrast, domestic brokerage Elara Capital has downgraded the stock to ‘Accumulate’ from ‘Buy’. “We cut FY26E USD revenue estimates as we expect TCS to report 1% drop in FY26 (vs 2% growth earlier) due to incremental weak outlook for some sectors. We are building moderate growth for FY27E.”

In its report, the brokerage highlighted that discretionary spending remains under intense scrutiny across industries. It noted that the new tariff order is exacerbating pressure on sectors like pharma, while spending in the energy sector has declined due to policy shifts and ongoing geopolitical tensions. Additionally, demand in the BFSI segment remains muted, particularly in Europe and the U.K., further weighing on growth prospects.

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