TCS: Strong deal wins, but is growth finally returning?

Tata Consultancy Services (TCS) is leading today's IT-sector rebound after its Q2 FY27 results gave investors something they had been waiting for: evidence that growth has not disappeared. The stock was up more than 5% in early trading on October 9, while the Nifty IT index gained around 3%. The result in numbers Revenue: ₹73,188 crore, up 1.3% sequentially Net profit: ₹13,884 crore, up 4% sequentially EBIT: ₹17,553 crore EBIT margin: 24% Total contract value: $9.6 billion 12-month IT-services attrition: 13.3% The $9.6 billion contract value is particularly interesting. It suggests demand for large technology projects remains available even though discretionary spending has been cautious. **But there is a weakness** Constant-currency revenue growth was only 0.5%. That means the large deal pipeline has not yet translated into strong reported revenue growth. This is the key issue I would carry forward from the result. TCS also declared a ₹12 per-share interim dividend, with October 14 as the record date. The AI angle AI-related revenue and demand remain an important part of the story. Management's ability to convert AI-led bookings into recurring revenue will be more important than simply announcing more AI partnerships. There is also a new risk from the US government's changes around the PERM programme, although TCS has said it plans to continue hiring in the US and does not expect the development to materially disrupt operations. interpretation This is a better result than the headline 0.5% growth suggests, but I would not call it a full recovery yet. For me, the next two quarters are crucial. If contract wins begin converting into stronger constant-currency growth while margins stay around 24%, the earnings recovery becomes much more credible. !TCS