TCS shares get an upgrade from Avendus, but others remain cautiously optimistic

Shares of Tata Consultancy Services Ltd. (TCS) have been upgraded by brokerage firm Avendus Spark after its September quarter results on Friday, October 10. The stock will react to the results that were reported after market hours on Thursday.

Avendus Spark upgraded shares of TCS to "buy" from its earlier rating of "add", with a price target of ₹3,700 per share, compared to ₹3,690 earlier. The revised price target implies a potential upside of 20% from current levels.

The brokerage wrote in its note that the deal win momentum for TCS remains strong and provides visibility on revenue recovery through the second half of the current financial year.

Despite continued pressure on discretionary spends, the management tone on growth outlook is optimistic aided by vector consolidation deals, Avendus said.

On the AI data center announcements, the brokerage said that it carries significant potential, as well as risks. As a result, it has largely maintained its revenue and EBIT margin estimates for TCS for financial year 2026 and 2027.

Most of the other analysts covering TCS have either maintained their views or expressed caution with regards to the announcements made by the management.

Citi

Citi has maintained its "sell" rating on the stock with a price target of ₹2,800.

The brokerage said that its Earnings Per Share (EPS) estimates are largely unchanged. It added that the business outlook for the company is challenged and that the asset intensity in data centers will only increase as the years go by.

Goldman Sachs

Goldman Sachs has maintained its "buy" rating on TCS with a price target of ₹3,300.

It said that TCS' data centers announcement could translate into 15% to 20% of India's overall data center capacity.

"TCS is stepping up acquisitions, which it has historically stayed away from, to enhance capabilities, including in AI," the brokerage said.

The brokerage sees a "neutral" read-through for the rest of the Indian IT companies after TCS' results.

CLSA

CLSA also maintained its "outperform" rating on the stock with a price target of ₹3,559. The brokerage said that the quarter was a beat on all fronts with broad-based growth and UK and retail being the remaining pain points.

"More importantly, TCS is showing clear signs of aggression with proactive decisions around restructuring its workforce to make it AI ready, being more acquisitive in future around technologies in demand and plans to create 1GW of data centre capacity over the next 5-7 years," CLSA said.

The brokerage added that the capex push will offer more vertically integrated technology solutions and drive earnings growth, but will alter its Return on Capital Employed (RoCE) and Free Cash Flow / Net Profit profile.

Out of the 51 analysts that have coverage on TCS, 33 have a "buy" rating, 13 say "hold", while five have a "sell" recommendation.

Shares of TCS have gained in three out of the four trading sessions this week, continuing their rebound from the 52-week low that the stock fell to on October 1. The stock ended near the day's high on Thursday as well ahead of the results announcement.

To be updated with more.