Brokerages back TCS as it doubles down on AI-led transformation

IT major Tata Consultancy Services (TCS) is sharpening its ambition to emerge as the world’s largest artificial intelligence (AI)-led technology services company, as outlined during its Investor Day 2025. 

 

Brokerages came away encouraged by the scale of the opportunity, the clarity of strategy, and early signs of monetisation, even as questions linger around margin aspirations in a shifting investment cycle.

 

At the core of TCS’s vision is a five-pillar framework designed to reorient the company from a digital-first services model to AI-centric enterprise transformation. The pillars span internal transformation through an AI-first operating model; a redefinition of services via a new AI transformation unit and a human-plus-AI delivery construct; a future-ready talent strategy anchored in AI fluency; industry- and domain-specific AI solutions for clients; and a broader AI ecosystem play covering partnerships, acquisitions and new venture creation.

 

A key highlight from the Investor Day, analysts noted, was TCS’s first-ever disclosure of AI services revenue. The company reported annualised AI services revenue of around $1.5 billion, growing roughly 16 per cent quarter-on-quarter (Q-o-Q) in the most recent period. 

 

Management also indicated that AI is no longer a fringe activity as TCS is running AI programmes with 54 of its top 60 clients, while nearly 85 per cent of clients contributing over $20 million in revenues are already leveraging TCS for AI-related work. Since the advent of generative AI tools such as ChatGPT, the company has completed close to 5,000 AI projects.

 

Motilal Oswal described the Investor Day as marking “a brave new world” for TCS, noting visible evidence that AI services demand is beginning to take shape across global enterprises. The brokerage highlighted management’s intent to play across the entire AI stack and viewed the company’s evolving stance on mergers and acquisitions (M&A), underscored by recent deals such as Listengage and Coastal, as a positive shift. However, Motilal Oswal flagged some disappointment over TCS reiterating its 26-28 per cent Ebit margin aspiration, arguing that such a target could leave growth opportunities untapped at this stage of the cycle. The brokerage reiterated its ‘Buy’ rating, valuing TCS at 26x FY28E earnings with a target price of ₹4,400, implying a 37 per cent upside.

 

Nuvama also struck a constructive tone, calling the Investor Day a clear signal of TCS’s leadership in AI transformation. It pointed to the sizable opportunity arising from persistent enterprise technology debt and still-incomplete cloud adoption, which together create fertile ground for AI-driven modernisation. While noting the reaffirmation of the 26-28 per cent margin band, Nuvama emphasised TCS’s continued commitment to shareholder returns of 80–100 per cent of free cash flow. The brokerage maintained a ‘Buy’ rating with an unchanged target price of ₹3,650.

 

Emkay, meanwhile, highlighted AI-led modernisation as a central theme, noting that projects once deemed uneconomical due to cost and complexity are now becoming viable with generative AI. It also underscored TCS’s annualised $11 billion revenue opportunity from redesigning services through AI, alongside an investible surplus of $6.3 billion to support capability-led acquisitions. Despite elevated investments, Emkay believes operating leverage and a shift to higher-value advisory work can support margins, and it retained an 'Add' rating with a target price of ₹3,250.

 

That said, brokerages agree that while execution and margin trade-offs will bear watching, TCS is positioning itself decisively to ride the next AI-led growth cycle in global IT services.

 

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