TCS leads IT rally, jumps 4%; Infosys, HCLTech, Tech Mahindra gain as Street backs Q1 earnings

Shares of Tata Consultancy Services (TCS) rose more than 4% in early trade on Friday as brokerages largely retained their positive view on the country's largest software exporter following its June quarter earnings. Analysts, however, cautioned that macroeconomic uncertainty, delayed client decision-making, and higher investments in artificial intelligence (AI) could weigh on revenue growth and margins in the near term.

Reacting to the Q1FY27 results, TCS shares gained as much as 4.1% to ₹2,132 on the BSE, taking the company's market capitalisation to ₹7.62 lakh crore. Ahead of the earnings announcement, the IT stock ended 0.52% lower at ₹2,047.75 on Thursday, with a m-cap of ₹7.40 lakh crore.

The stock had touched a 52-week high of ₹3,399.75 on July 10, 2025, and a 52-week low of ₹1,976 on July 1, 2026.

TCS shares have corrected 35% in calendar year 2026 and are down over 38% over the past one year. In the last one month, the stock has declined nearly 3%.

For the quarter ended June 30, 2026, TCS reported a 2.7% quarter-on-quarter decline in consolidated net profit to ₹13,349 crore, compared with ₹13,718 crore in the preceding quarter. Revenue, however, increased 2.2% sequentially to ₹72,275 crore from ₹70,698 crore, while earnings before interest and tax (EBIT) fell 3.1% to ₹17,317 crore.

IT stocks witness broad-based buying

Taking cues from TCS's Q1 earnings, IT stocks witnessed broad-based buying on Friday, with the Nifty IT index rising nearly 2% to emerge as the top-performing sectoral index. Sector heavyweights Infosys , HCLTech , LTIMindtree, Tech Mahindra , and Persistent Systems also traded firmly in the green.

Oracle Financial Services Software (OFSS) led the gains with a 3.32% rise, followed by LTIMindtree (2.36%), HCLTech (2.29%), Tech Mahindra (2.08%), Infosys (1.94%), Wipro (1.93%), Persistent Systems (1.92%), Coforge (1.90%), and Mphasis (1.79%).

Brokerages remain positive despite near-term challenges

Brokerages largely retained their positive view on TCS following its Q1FY27 results. They, however, cautioned that macroeconomic uncertainty, delayed client decision-making, and higher investments in artificial intelligence (AI) could weigh on revenue growth and margins in the near term.

Motilal Oswal reiterated its 'Buy' rating with a target price of ₹2,350 but trimmed its FY27 margin estimate by 30 basis points to factor in continued spending on AI capabilities, partnerships, and sales initiatives. The brokerage expects revenue, EBIT, and adjusted PAT to grow 10%, 8.4%, and 9.3% year-on-year, respectively, in Q2FY27.

While TCS expects demand to improve in the second quarter on the back of a pent-up technology spending backlog, the brokerage said evidence of a broad-based recovery remains limited. It expects FY27 demand to stay muted despite an improvement in management commentary.

Choice Equity Broking also retained its 'Buy' rating with a lower target price of ₹2,320 after cutting revenue and earnings estimates by 0.4%-5%. It expects AI-led productivity gains to remain a near-term headwind for traditional IT services, with benefits from AI transformation spending materialising gradually. The brokerage forecasts a 3.7% revenue CAGR and 7% EPS CAGR over FY26-FY29, supported by a gradual recovery rather than a broad-based demand revival.

Elara Securities maintained an 'Accumulate' rating while reducing its target price to ₹2,300 from ₹2,780. It believes demand remains weak across most verticals, except BFSI and Consumer, and expects muted revenue growth as AI momentum offsets weakness in traditional services. Elara lowered its FY27 and FY28 US dollar revenue growth estimates to 1.5% and 1.2%, respectively.

Emkay Global retained its 'Add' rating with the highest target price among the brokerages at ₹2,600. It highlighted TCS's $9.5-billion deal wins, including an $800-million AI-led transformation deal with SKF, as evidence of healthy deal momentum. The brokerage expects a recovery in the Life Sciences and Manufacturing verticals from the second quarter and sees AI-led transformation creating long-term opportunities. However, it believes a meaningful re-rating of the stock would require a sustained acceleration in revenue growth.

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)