Choice Institutional Equities has issued a positive outlook on Tata Consultancy Services , maintaining its BUY rating with a target price of ₹3,950.00. The brokerage firm's recommendation is based on the company's strong artificial intelligence growth momentum and strategic business transformation initiatives.

AI-Driven Growth Strategy

TCS's artificial intelligence expansion is being powered by multiple growth drivers that position the company for sustained performance. The brokerage highlights rapidly expanding AI services revenue as a key factor, supported by the company's AI-first delivery culture that has been integrated across its operations.

The technology services giant is witnessing rising adoption among large clients, indicating strong market confidence in its AI capabilities. Additionally, TCS is undergoing workforce transformation to align with its AI-focused strategy, while building strong ecosystem partnerships to enhance its market position.

Strategic Partnerships and Infrastructure

A notable development in TCS's AI strategy is its HyperVault AI-led data-centre joint venture with TPG. This partnership represents a significant step in strengthening the company's AI infrastructure capabilities and expanding its service offerings in the data management space.

Core AI Programs

TCS is executing two fundamental AI programs that form the backbone of its strategic direction:

• AI-led business transformation: Focusing on helping clients transform their business models using artificial intelligence
• AI-enabled modernisation: Supporting clients in modernizing their existing systems and processes with AI integration

These programs support TCS's strategic shift toward an outcome-based, AI-driven business model, which the brokerage believes will provide long-term competitive advantages in the market.

Financial Projections and Valuation

Choice Institutional Equities has provided detailed growth projections for TCS over the FY25–FY28E period:

The target price of ₹3,950.00 is based on a 24x multiple applied to the average of FY27E and FY28E EPS of ₹164.60. This valuation methodology reflects the brokerage's confidence in the company's earnings growth trajectory and its ability to maintain premium valuations in the market.

Investment Outlook

The BUY rating reflects Choice Institutional Equities' positive assessment of TCS's strategic positioning in the artificial intelligence space. The combination of expanding AI services revenue, cultural transformation, client adoption, and strategic partnerships creates a comprehensive growth framework that supports the brokerage's optimistic outlook on the stock's performance potential.

Tata Consultancy Services delivered a measured performance in its third quarter, showcasing the company's ability to maintain operational stability amid market uncertainties. The IT services giant reported revenue growth of 0.8% quarter-on-quarter in constant currency terms, reflecting a cautious approach in the current business environment.

Financial Performance Overview

The company's financial metrics for the quarter demonstrate disciplined execution across key parameters:

Margin Management and Strategic Investments

TCS successfully maintained its operating margins at 25.20% during the quarter, demonstrating effective cost management strategies. The company achieved this stability through productivity gains that precisely counterbalanced two significant cost pressures: wage hikes and strategic investments in artificial intelligence capabilities.

The margin performance reflects the organization's disciplined approach to balancing growth investments with operational efficiency. Despite facing headwinds from salary increments and AI-focused expenditure, the company managed to preserve its profitability levels through enhanced productivity measures.

AI as Strategic Focus

IDBI Capital has identified TCS as being at an inflection point, with artificial intelligence emerging as a core engine for the company's future growth trajectory. This strategic positioning in AI technologies represents a significant shift in the company's operational focus, aligning with broader industry trends toward digital transformation and automation.

The brokerage's assessment suggests that TCS's investments in AI capabilities are positioning the company for enhanced competitiveness in the evolving technology services landscape. Following the Q3 results analysis, IDBI Capital has established a target price for the stock, indicating confidence in the company's strategic direction.