TCS Shares Fall After Q2 Profit Miss, But AI Push Sparks Long-Term Optimism

Shares of Tata Consultancy Services (TCS) traded lower on Friday following a mixed performance in the second quarter of FY26. The IT major reported a consolidated net profit of ₹12,075 crore, up 1.4% year-on-year (Y-o-Y) from ₹11,909 crore in the same period last year, falling short of analyst expectations of ₹12,559 crore. Revenue for the quarter rose 2.4% Y-o-Y to ₹65,799 crore, slightly surpassing the Bloomberg estimate of ₹65,267 crore.

TCS stock price fell as much as 1.45% intraday to ₹3,017.20 per share, marking its largest single-day decline since September 26, before paring losses to trade 0.9% lower at ₹3,031. Despite the short-term dip, the company continues to command a market capitalisation of ₹10.9 trillion, though its shares have declined 26% year-to-date against a 6.7% gain in Nifty 50.

Q2 Performance by Segment

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TCS’s total contract value (TCV) for Q2FY26 stood at $10 billion, up from $9.4 billion in the previous quarter and 20% higher compared to $8.3 billion in Q2FY25. Geographically, India grew 4% sequentially, while verticals such as BFSI saw 1.1% quarter-on-quarter (Q-o-Q) growth and 1% Y-o-Y. Life Sciences and Healthcare experienced a 3.4% quarter-over-quarter (Q-o-Q) rise but a 2.2% year-over-year (Y-o-Y) decline.

Strategic Moves: AI and Acquisitions

TCS announced a $72.8 million acquisition of US-based ListEngage, strengthening its Salesforce capabilities in a significant strategic move. In addition, the business announced a $6 billion AI data centre program to construct a self-contained, up to 1 GW AI facility in India within the next five to seven years. To establish TCS as a pioneer in AI-driven technology services, this action marks a dramatic shift towards capital-intensive AI infrastructure.

Brokerage Views and Outlook

Analysts' responses to TCS's Q2 earnings were not entirely consistent. Revenue and EBITDA margins surpassed projections, but profit was below expectations, according to Nuvama Institutional Equities, which revised down its FY26 and FY27 earnings per share (EPS) by 2% each. Citing favourable values and dividend yield, the brokerage kept its "Buy" rating.

Nomura maintained its neutral position, pointing out that, after accounting for restructuring expenses, FY26 is expected to perform better than FY25. Motilal Oswal reiterated a "Buy" rating, calling the India business robust but characterising the guidance as "somewhat fuzzy." Analysts predict that while short-term volatility may continue, long-term growth prospects—especially those fuelled by AI infrastructure—may present upside opportunities.

IT Industry Outlook

Digital transformation, cloud adoption, artificial intelligence, and cybersecurity services are driving the steady growth of the Indian IT industry. While mid- and small-cap enterprises investigate specialised markets like analytics and SaaS, large-cap companies like TCS, Infosys, and Wipro retain steady sales. Despite obstacles including talent shortages and international rivalry, long-term growth is supported by developing technology, strategic acquisitions, and rising local demand. Analysts anticipate consistent revenue growth and margin enhancement, enhancing India's standing as a major international centre for IT and drawing ongoing interest from investors in both conventional and cutting-edge technology services.

Conclusion

TCS’s Q2 earnings reflect a modest profit miss amid stable revenue growth. However, its ambitious AI and digital initiatives, along with strategic acquisitions, provide a compelling long-term growth narrative. While short-term volatility may continue, the company’s strategic pivot positions it for significant future opportunities in emerging technology sectors.