TCS Share Price Target Above Rs 4,000: Why Largest IT Stock Jumped 2% Despite Missing Q4 Estimates?

Tata Consultancy Services (TCS): The Tata Group-backed stock surged by nearly 2% on Friday, despite missing estimates in Q4FY25 earnings. TCS stock jumped to near Rs 3,300 levels. The majority of brokerages have recommended BUY on TCS stock, upgrading their rating. The bullish trend in TCS is due to its strong deal wins, continued thrust by clients in technology and shorter tariff-related impact.

TCS Share Price:

TCS's share price traded at Rs 3264.90 apiece, on BSE, up by 0.6% with market cap of Rs 11,80,563.87 crore. The stock opened at Rs 3290 apiece and climbed nearly 2% to hit an intraday high of Rs 3298.40 apiece. In the previous session, TCS' stood at Rs 3246.10 apiece.

TCS Q4 Results:

During Q4FY25, TCS reported a consolidated net profit of Rs 12,224 crore, which was attributable to owners, registering a decline of 1.7% compared to a net profit of Rs 12,434 crore in Q4FY24. Also, the PAT slipped by 1.26% from a net profit of Rs 12,380 crore which was reported in the preceding quarter.

Meanwhile, consolidated revenue from operations came in at Rs 64,479 crore, registering a growth of 5.76% from revenue of Rs 61,237 crore in Q4FY24. Revenue is higher by 0.79% sequentially.

Also, in the constant currency, revenue growth was at 2.5%. For the fourth quarter, TCS reported a strong $12.2 billion for Q4. While overall, the deal wins stood at $39.4 billion for the entire fiscal year 2024-25.

Overall, FY25 revenue stood at Rs 255,324 crore, registering a growth of 6% YoY. In constant currency, the growth stood at 4.2% YoY. FY25 net profit came in at Rs 48,553 crore, rising by 5.76% YoY.

Why BUY TCS Stock?

Brokerage Elara Capital said, "We upgrade Tata Consultancy Services (TCS IN) to BUY from Accumulate as: i) valuations are closer to pre-Covid levels, ii) given the continued thrust by clients to spend on technology, iii) strong TCV and iv) short-lived tariff-related impact, as indicated by the management. Q4 revenue came in a tad below our estimates and the margin for Q4 was hit by tactical interventions - Planned promotion of some senior employees and certain brand-related spends. TCS ended FY25 with 4.2% growth in CC terms and 3.8% in USD terms. We cut our FY26E revenue numbers to reflect an uncertain
environment, which may impact growth in H1, which typically is a strong half."

Elara's note further said, "We expect the growth to rebound in FY27. We have tweaked our FY26/27 margin estimates to reflect a rise in cost due to an uptick in attrition. TCS has strengthened its leadership by appointing its COO and chief strategy officer, both from the Tata Group."

Elara has set Rs 3,970 target on TCS.

Further, brokerage JM Financial highlighted that TCS' 4Q revenues (-0.8% cc QoQ) missed estimates (JMFe: -0.1%). Miss was attributable to higher than expected BSNL ramp-down (India revenues: -14% QoQ; cc terms). International revenues were in line, though undershot management's quarter beginning expectations. Elevated uncertainty notwithstanding, management believes FY26 growth, at least ex-BSNL, will be better than FY25's (c.1.5% cc QoQ).

JM's note said, "Record deal wins (Q4 TCV: USD 12.2bn), strong order backlog (Last 24 months book-to-bill: 1.38x) and receding client-specific challenges underpin their confidence. Decision delays in back-half of 4Q however reflect in elevated leakages, per our TCV-revenue waterfall model That could stay, clouding FY26 prospects. That said, such is the strength of TCS' order backlog that even if leakages were to sustain, its FY26 revenue visibility is c.90% of FY25 ARR currently, per our estimate. That should lend stability to TCS' performance in the current environment."

Hence, JM's note added, "We therefore believe TCS offers maximum safety among IT Services stocks at this stage. For investors too, safety should take precedence over growth. We have cut FY26E revenues growth expectations from 3% to 1%, to factor higher leakages and softer 1Q. That is flowing to 4-5% cut to our FY26-27E EPS. Scope of further earning downgrade appears limited for TCS. Besides, at 5% discount to 10year median PER, valuations are reasonable too. Maintain BUY with revised TP of INR 4,060."

Explaining about Trump's tariff impact, Sumit Pokharna, VP-Fundamental Research - IT, Kotak Securities said, the imposition of tariffs by the Trump administration, followed by a partial pause for countries other than China and an escalation of tariffs against China, among other measures, has led to heightened macro uncertainty and geopolitical tensions and risks slowing down global economic growth. We believe that a combination of higher uncertainty and growth slowdown is not a favorable environment for IT services demand, especially in H1FY26, which is a seasonally strong period for IT services. Clients under distress will look to pass on the pain to vendors, leading to an impact on IT service players in terms of demand or/and pricing.

Pokharna added, unfavorable elements in demand were highlighted by the TCS' management in the multiple segments-retail, manufacturing, insurance, telecom, healthcare, and professional services. We believe that IT services spending growth will likely reduce below our base case assumption of 4-5% growth in FY26. We believe that FY26E could be impacted by project deferrals and cancellations, and a slowdown in decision-making on transformation programs that lack quick RoI. TCS is more resilient to the slowdown, but not immune to it, in our view. Revenue growth will be impacted by demand slowdown and some impact of revenue deflation from generative AI. The increased levels of uncertainty in the global economic and geopolitical landscape in the past few weeks have led to instances of delays in decision-making and higher scrutiny and pressure on discretionary spending recently. TCS had some delays and deferrals started happening from the third week of February, although a significant impact was felt in March.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on article mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.