What is the story about?
Shares of Tata Consultancy Services will be in focus on Thursday, December 18, following the company's annual investor day held on Wednesday. India's largest IT services provider reiterated its ambition to become the world's largest AI led technology services company and, for the first time, disclosed key metrics to quantify the scale of its AI business.
TCS said it has executed more than 5,000 AI engagements so far, with AI related services generating about $1.5 billion in annualised revenue. This accounts for roughly 5% of the company's revenues, compared with around 3% advanced AI revenues reported by peers.
AI revenues are growing faster than the company's overall business, with growth of 16.3% quarter on quarter and 38.2% year on year in constant currency terms.
Its new age services, including AI and cybersecurity, are contributing about $11 billion in annualised revenue. TCS said it is prepared to both build capabilities organically, such as in data centre related businesses, and pursue acquisitions, as seen in its recent buys of ListEngage and Coastal Cloud. It currently has an investible surplus of over $6.3 billion.
TCS maintained its margin aspiration band of 26-28% and said its focus remains on driving growth with profitability while continuing to invest.
Brokerage firm CLSA has an 'Outperform' rating on TCS with a price target of ₹3,559. Following the analyst day, CLSA pointed out the company's vision to emerge as the largest AI led technology services organisation globally.
It mentioned that TCS disclosed its AI services revenue for the first time. CLSA said TCS's AI strategy rests on five pillars, including internal transformation, redefining services using AI, building a future ready talent model, making AI real for clients, and developing a strong AI ecosystem.
Morgan Stanley has an 'Overweight' rating on the stock with a price target of ₹3,430. The brokerage said TCS is strategically pivoting to offer a full stack of AI led services, from infrastructure to intelligence.
It believes enterprise AI adoption is still at an early stage, that AI will expand the company's addressable market, and that TCS is making the required investments to execute its vision.
Nomura, which has a 'Neutral' rating and a price target of ₹3,300, said the company's five pillar transformation strategy is centred on infusing AI across its operations.
It mentioned the use of AI for internal transformation, service redefinition, talent development, client readiness and ecosystem building. Nomura also pointed out that about 40% of TCS's portfolio is now in newer technology areas, while the company continues to maintain financial discipline even as it invests for growth.
Jefferies, which has a 'Hold' rating and a price target of ₹3,100, said TCS provided deeper clarity on its five pillar strategy to become the world's largest AI led technology services firm.
Nuvama has a 'Buy' rating on TCS with a price target of ₹3,650. It mentioned the company's clear shift from digital services to AI centric enterprise transformation, its structured five pillar AI execution framework, and the scaling up of AI revenues to about $1.5 billion annually across nearly 5,000 engagements.
The brokerage wrote in its note about the reiteration of margin guidance at 26-28% and the company's commitment to shareholder returns of 80-100% of free cash flow. The brokerage remains positive on TCS and expects it to be among the biggest beneficiaries of a recovery in technology spending.
Shares of Tata Consultancy Services Ltd. ended 0.40% higher on Wednesday at ₹3,217.80. The stock is down 22% so far in 2025.
TCS said it has executed more than 5,000 AI engagements so far, with AI related services generating about $1.5 billion in annualised revenue. This accounts for roughly 5% of the company's revenues, compared with around 3% advanced AI revenues reported by peers.
AI revenues are growing faster than the company's overall business, with growth of 16.3% quarter on quarter and 38.2% year on year in constant currency terms.
Its new age services, including AI and cybersecurity, are contributing about $11 billion in annualised revenue. TCS said it is prepared to both build capabilities organically, such as in data centre related businesses, and pursue acquisitions, as seen in its recent buys of ListEngage and Coastal Cloud. It currently has an investible surplus of over $6.3 billion.
TCS maintained its margin aspiration band of 26-28% and said its focus remains on driving growth with profitability while continuing to invest.
Here's what brokerages recommend
Brokerage firm CLSA has an 'Outperform' rating on TCS with a price target of ₹3,559. Following the analyst day, CLSA pointed out the company's vision to emerge as the largest AI led technology services organisation globally.
It mentioned that TCS disclosed its AI services revenue for the first time. CLSA said TCS's AI strategy rests on five pillars, including internal transformation, redefining services using AI, building a future ready talent model, making AI real for clients, and developing a strong AI ecosystem.
Morgan Stanley has an 'Overweight' rating on the stock with a price target of ₹3,430. The brokerage said TCS is strategically pivoting to offer a full stack of AI led services, from infrastructure to intelligence.
It believes enterprise AI adoption is still at an early stage, that AI will expand the company's addressable market, and that TCS is making the required investments to execute its vision.
Nomura, which has a 'Neutral' rating and a price target of ₹3,300, said the company's five pillar transformation strategy is centred on infusing AI across its operations.
It mentioned the use of AI for internal transformation, service redefinition, talent development, client readiness and ecosystem building. Nomura also pointed out that about 40% of TCS's portfolio is now in newer technology areas, while the company continues to maintain financial discipline even as it invests for growth.
Jefferies, which has a 'Hold' rating and a price target of ₹3,100, said TCS provided deeper clarity on its five pillar strategy to become the world's largest AI led technology services firm.
Nuvama has a 'Buy' rating on TCS with a price target of ₹3,650. It mentioned the company's clear shift from digital services to AI centric enterprise transformation, its structured five pillar AI execution framework, and the scaling up of AI revenues to about $1.5 billion annually across nearly 5,000 engagements.
The brokerage wrote in its note about the reiteration of margin guidance at 26-28% and the company's commitment to shareholder returns of 80-100% of free cash flow. The brokerage remains positive on TCS and expects it to be among the biggest beneficiaries of a recovery in technology spending.
Shares of Tata Consultancy Services Ltd. ended 0.40% higher on Wednesday at ₹3,217.80. The stock is down 22% so far in 2025.
