TCS Q2FY27 Strong Profit Growth, but Revenue Remains Subdued

Tata Consultancy Services (TCS) reported Q2FY27 net profit of ₹13,884 crore, rising 14.9% year-on-year and surpassing Bloomberg estimates. Revenue increased 11.2% Y-o-Y to ₹73,188 crore, while sequential growth remained modest at 1.3%. Constant-currency revenue growth of just 0.5% Qo-Q highlights subdued business momentum during H1FY27, despite healthy profitability. The demand environment remained stable, with TCS increasingly leveraging artificial intelligence to deliver value to clients. AI-led revenue reached $3.1 billion, contributing over 10% of overall revenue, highlighting the growing importance of AI-driven services. The company secured total contract value (TCV) of $9.6 billion during the quarter, indicating some improvement from Q1FY27. However, analysts remain cautious about weak large-deal momentum and subdued demand in North America, projecting annual growth of only 1.5%-2%. Operationally, the EBIT margin stabilised at 24%, supported by ongoing execution efforts, although external consultant expenses and project-related costs continue to exert pressure. TCS maintains its long-term margin target of 26%-28%, but pricing pressures and elevated delivery costs remain key challenges. Sectoral performance was mixed, with banking and technology showing resilience, while consumer and energy verticals struggled. On the workforce front, TCS added 10,000 freshers during the quarter, taking total headcount to 598,056, while attrition stood at 13.3%. Overall Outlook: TCS delivered better-than-expected profit growth, supported by AI-led business expansion and stable margins. However, weak sequential constant-currency growth and limited large-deal momentum temper the outlook. Investors should monitor deal wins, North American demand, AI revenue conversion and margin recovery to assess whether earnings growth can translate into stronger business momentum.