Shares of Tata Consultancy Services (TCS) surged 3% intraday on Thursday after the country’s largest software exporter released its June quarter earnings report, which was largely in line with Street expectations with a slight miss on margins due to flattish revenue growth and wage hikes that started from April 2023. Post Q1 FY24 results, most brokerages reiterated their bullish calls on TCS and expect the Tata Group company to deliver up to 16% returns from the current levels despite lingering concerns about macro headwinds in the U.S. and the European markets which contribute to maximum revenue.

Reacting to Q1 results, TCS shares opened marginally higher at ₹3,276 on the BSE against the previous closing price of ₹3,260.20. In the first two-hour of the day’s trade so far, the IT major gained as much as 3% to ₹3,360 level, while the market capitalisation climbed to ₹12.25 lakh crore. On the volume front, total traded shares jumped more than two times to 1.46 lakh compared with two-week average of 0.57 lakh scrips.

TCS share price trades 6% lower than its 52-week high of ₹3,575 touched on February 2, 2023, while it has risen nearly 15% from its 52-week low of ₹2,926 on September 26, 2022. The largecap IT stock has delivered 10% returns in the last one year, while it has risen nearly 2% in the calendar year 2023. In the past six months, the counter has lost nearly 1%, whereas it has added over 3% in a month and 1% in a week.

Post market hours on Wednesday, TCS released its first-quarter earnings for the financial year 2023-24, which saw its top and bottom line growing by double-digit on a year-on-year (YoY) basis. The board of the company also declared the first interim dividend of ₹9 per equity share for the current fiscal.

The country’s most valued IT firm posted 16.8% YoY growth in consolidated net profit at ₹11,074 crore in the April-June quarter of the current fiscal, while it sequentially dropped by 2.8% from ₹11,392 crore in the March 2023 quarter. The revenue from operations rose 12.6% YoY to ₹59,381 crore, while it fell marginally by 0.37% from ₹59,162 crore in Q4FY23.

In dollar terms, the revenue climbed 7% to $7,226 million as against the same quarter last fiscal, while it was flat compared with the previous quarter, which was a tad below the consensus estimates of 0.2% QoQ in constant currency (CC) terms.

According to analysts at ICICI Securities, soft revenue growth during the quarter was due to growing caution among clients resulting in deferment of discretionary spending.

“Persistent uncertainty surrounding the macro has led to growing caution among clients, which resulted in deferment of discretionary spends. Clients are scrutinising RoIs in existing projects and deferring or cancelling those with lower returns. BFSI, communications and hi-tech verticals continued to exhibit softness, while manufacturing, healthcare and retail did well during the quarter,” the breakage said on the demand outlook.

What to do with TCS stock?

As many as 15 analysts have offered long term price recommendations for TCS at an average target of ₹3,595.85, an upside of 10.3% from Wednesday’s closing level, as per data released by Trendlyne, an investment analytics platform.

While ICICI and Axis Securities retained their ‘Buy’ stance on TCS shares, foreign brokerages Nomura, Jefferies, and Morgan Stanley assigned ‘Reduce’, ‘Hold’ and ‘Equal Weight’ ratings on the stock.

ICICI Securities

The domestic brokerage has maintained “BUY” rating on the stock with a revised 12-month target price of ₹3,780, implying 16% potential upside. “Strong orderbooking momentum, large deal win announcements, macro recovery in key geographies like the U.S. and EU, and release of pent-up demand in the coming quarters would help TCS get back to double-digit revenue growth in FY25E,” it said in the latest report.

The brokerage has modestly tweaked its estimates and projects revenue growth at 5.9% YoY in CC terms and 30bps YoY growth in EBIT margins to 24.4% for the remainder of FY24E, citing building-in a gradual pick-up in demand. “Our restraint is due to the uncertain demand outlook shared by TCS management in the near term for key verticals like banking, hi-tech and telecom,” it said.

Axis Securities

The brokerage house has maintained “Hold” rating on the stock with a revised price target of ₹3,370 per share from earlier estimate of ₹3,350 apiece, implying an upside of 3% from the current price. “With a limited upside from the current market price and the stock lacking triggers for the upside, we maintain our HOLD rating on the stock,” it said in a report.

On future outlook, the agency said that the growth rate may slow down in FY24 due to uncertainties in the world’s largest economies. “However, supply-side constraints are easing up, which will help the company to gain some margin expansion in the near term. While H2FY24 may see some revision on the demand side, the industry’s and the company’s long-term outlook remain robust,” it said.

From a long-term perspective, Axis Securities believes that TCS has built a resilient business model by securing multiple long-term contracts with the world’s leading brands. It has also established robust capabilities that will enable it to gain market share moving ahead. However, prevailing uncertainties in large economies continue to pose short-term headwinds to the company's growth prospects, it noted.


Global brokerage Nomura affirmed a 'Reduce' rating for TCS with a price target of ₹2,800 after the country’s largest IT company missed both revenue and margin estimates in Q1FY24. The agency said that the company is unlikely to hit a 25% EBIT margin in FY24, citing lingering concerns about order book.


Another global brokerage has assigned a “Hold” rating with a price target of ₹3,450, saying that TCS' Q1 revenues and margins were in line with its estimates while profits exceeded expectations.

Morgan Stanley

The U.S.-based rating agency has maintained “Equal Weight” with a price target of ₹3,305, citing that revenues missed consensus estimates slightly. The agency believes that cost control to help margins amid limited near-term demand visibility. 

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