Tata Consultancy Services third quarter performance drew mixed responses from brokerages, with analysts broadly agreeing that while headline numbers were largely inline, underlying trends in international markets remain soft. However, optimism around fiscal 2027 exit momentum, stable margins, and scaling of AI-led opportunities continue to sustain long-term expectations.

Q3 Performance Highlights

TCS delivered a measured performance in the third quarter, with key metrics reflecting the ongoing cautious global IT spending environment.

EBIT margins remained stable at around 25.2% as wage hikes and higher marketing expenses were largely offset by workforce optimization and currency tailwinds. Order intake stood at $9.3 billion, remaining broadly flat on a trailing twelve-month basis, reflecting the still-cautious global IT spending environment.

Most brokerages noted that developed markets, particularly North America and BFSI sectors, performed weaker than expected, while regional markets and select verticals like CPG provided some support.

Brokerage Perspectives

Morgan Stanley: Overweight Rating Maintained

Morgan Stanley maintained an Overweight rating on TCS and raised its target price to ₹3,540.00 from ₹3,430.00. While acknowledging that underlying trends were softer than expected, particularly in international business growth, the brokerage highlighted management commentary pointing to momentum holding up into calendar year 2026.

Key positives identified by Morgan Stanley include:

• Stable margins near 25% with management confidence of moving towards 26%
• Expectations of fiscal 2026 exiting at better growth rate than previous year
• Early progress in AI journey with proof-of-concept projects moving into production
• AI revenues scaling up despite sector transition phase

The brokerage modestly increased financial year 2027-28 estimates and sees potential catalysts from data-center-related developments over the medium term.

Citi: Cautious Stance Continues

Citi maintained its Sell rating on TCS, trimming its target price marginally to ₹3,020.00. The brokerage characterized the December quarter as inline but highlighted that muted international business growth is likely to disappoint investors, especially following management's relatively positive tone after the second quarter.

Citi's concerns include:

• Equipment and software contributing nearly half of sequential growth
• Questions about sustainability of core services momentum
• High competitive intensity in the sector
• AI-led productivity risks
• Rise of global capability centres

Despite management confidence, Citi believes the business outlook remains challenged and continues to prefer peers like Infosys and HCLTech within large-cap IT.

Kotak Securities: Constructive Outlook

Kotak Securities maintained a Buy rating and increased its fair value to ₹3,675.00 from ₹3,550.00. While acknowledging muted revenue growth, the brokerage emphasized stable margins and improving execution indicators.

Kotak believes these steps could help TCS close the growth gap with peers in the next financial year. The brokerage sees TCS well-positioned as a core partner for clients across cloud, data, and AI journeys, despite near-term incumbency challenges during the revenue deflation phase of GenAI adoption.

Market Outlook

The mixed brokerage responses reflect the broader challenges facing the IT services sector, with companies navigating through a period of cautious client spending while positioning for future growth opportunities. TCS's stable margin performance and strategic focus on AI capabilities provide a foundation for long-term growth, though near-term revenue momentum remains constrained by global market conditions.

Tata Consultancy Services led the market focus with mixed Q3FY26 results, showing revenue growth but profit decline due to regulatory impacts. HCLTech also reported quarterly results, while several other companies announced major business developments and corporate actions.

TCS Q3FY26 Financial Performance

Tata Consultancy Services delivered revenue in line with estimates but missed profit expectations in Q3FY26. The company's financial metrics showed:

The significant profit decline was primarily attributed to new labour codes, legal claims, and restructuring costs totaling ₹3,391 crore. Despite the profit miss, TCS announced a bumper dividend of ₹57 per share, including a special dividend of ₹46 per share.

TCS Operational Highlights

The company demonstrated strong performance in key operational areas:

• Revenue grew 0.8% in constant currency terms, up from 0.6% in Q2
• Q3 annualized AI revenue reached $1.8 billion, up 17.3% quarter-on-quarter in constant currency
• Deal wins remained robust at $9.3 billion versus $10 billion in Q2
• Attrition rate increased slightly to 13.5% from 13.3% in Q2
• Headcount decreased by 11,151 quarter-on-quarter in Q3

HCLTech Q3FY26 Results

HCL Technologies reported strong revenue growth but faced similar profit pressures:

HCLTech's results beat revenue estimates but missed on profits, with new labour codes impacting profits by ₹956 crore. The company upgraded its service revenue guidance to 4.75%-5.25% from the previous 4%-5% range.

Major Corporate Developments

Several companies announced significant business initiatives:

KP Energy entered into an agreement with the Gujarat Government to develop renewable energy projects worth ₹4,000 crore.

Sical Logistics received a Letter of Award worth ₹4,038 crore from Southeastern Coalfields for a project in Chhattisgarh.

Biocon opened its Qualified Institutional Placement on January 12 with an approved floor price of ₹387.74 per share, representing a 4% premium to the last trading price.

Other Notable Announcements

Anand Rathi reported total income down 0.4% at ₹306 crore quarter-on-quarter, while revenue grew 22.18% year-on-year to ₹289.62 crore with PAT increasing 29.61% year-on-year to ₹100.19 crore.