What is the story about?
TCS Share Price Target: Shares of IT major Tata Consultancy Services (TCS) have declined sharply by about 25 per cent over the past 12 months. Meanwhile,
the broader NSE Nifty IT index has also fallen nearly 15 per cent, slipping from 45,526 to 38,488 during the same period. This raises a key question for investors: Is the recent correction an opportunity for long-term investors to accumulate the stock, or should existing shareholders consider booking profits? Analysts at leading brokerage Nuvama have reaffirmed their 'buy' call and maintained a 12‑month price target with expecting a gain of about 13 per cent. The brokerage expects TCS to emerge as one of the biggest beneficiaries of the upcoming recovery in global technology spending, supported by its aggressive shift from traditional digital services to full-scale, AI-centric enterprise transformation.
Why should you buy TCS stock? Here’s what Nuvama highlights
Below are the key reasons cited by the brokerage for its positive view on the stock:
- AI revenue reaches $1.5 billion
- Demand tailwinds from high tech debt and incomplete cloud migration
- Five-pillar strategy to become the world’s largest AI services provider
- Strong financials with stable margins and robust free cash flow
AI revenue hits $1.5 billion; over 5,000 engagements completed
At its recent analyst meet, TCS said its artificial intelligence business has scaled rapidly, reaching $1.5 billion in annualised revenue, supported by more than 5,000 AI engagements across industries.
Notably, 85 per cent of large clients (those contributing over $20 million in annual revenue) are already consuming TCS’s AI services. This indicates that AI adoption has moved beyond pilot projects to enterprise-wide deployment.
The company attributed this momentum to a broad-based shift from automation-focused digital solutions to AI systems capable of autonomy, decision-making support, and contextual intelligence—significantly expanding its addressable market.
Five-pillar strategy to become the world’s largest AI-led IT services firm
TCS has outlined an ambitious five-pillar strategy aimed at establishing global leadership in AI-powered enterprise transformation. The key elements include:
- Internal AI transformation, positioning TCS itself as an AI-first organisation
- Redefining service lines using a multi-level autonomy framework, moving from tool-assisted workflows to autonomous, AI-driven delivery models
- A future-ready talent model, with over 180,000 employees already trained in advanced AI skills
- Making AI real for clients by building scalable, industry-specific and cross-industry AI solutions
- Strengthening the AI ecosystem through hyperscaler partnerships, deep-tech alliances, and targeted M&A
According to Nuvama, TCS has already delivered more than 200 AI platform deployments and is seeing strong traction among its top 60 clients, 54 of whom are engaged in advanced AI programmes.
Demand tailwinds: High tech debt, incomplete cloud migration
Enterprises globally continue to grapple with high levels of tech debt, while cloud penetration remains at around 65 per cent, leaving significant headroom for AI-led modernisation, Nuvama said.
The brokerage noted that this environment creates opportunities for long-pending initiatives such as core system upgrades and mainframe modernisation, which are now becoming more efficient with AI, particularly in the BFSI sector.
Additionally, short-cycle AI projects are gaining traction, helping improve deal velocity after several sluggish quarters for the Indian IT sector.
Margins intact, FCF robust
Despite elevated investments in AI talent, platforms, and partnerships, TCS has reiterated its margin aspiration of 26–28 per cent and its long-standing commitment to return 80–100 per cent of free cash flow to shareholders, according to Nuvama.
The brokerage’s projections indicate steady improvement across key metrics. Revenue is expected to rise from Rs 2.6 trillion in FY26 to Rs 2.93 trillion in FY28, while earnings per share are projected to grow from Rs 140.6 to Rs 164.1 over the same period.
“Return on equity is expected to remain exceptionally strong at 53–54 per cent, while free cash flow is projected to rise to Rs 569,601 million in FY28,” Nuvama analysts said. Despite near-term macroeconomic softness, the brokerage believes TCS’s strong cash generation and disciplined capital allocation continue to make shareholder returns attractive.
What are the risks?
Nuvama has also flagged certain risks that investors should be mindful of, including:
- A potential recession in the US, TCS’s largest market
- A prolonged slowdown in Europe
- Currency volatility impacting profitability
- Pricing pressure and talent retention challenges in high-demand AI skill areas
TCS share price target
Nuvama has set a one-year price target of Rs 3,650 for TCS, implying an upside of 13.43 per cent from Wednesday’s closing price.
(Disclaimer: The above article is meant for informational purposes only, and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money related decisions.)
