TCS shares drop as Q2 profit misses street estimates; should you sell?

Analysts said TCS delivered a strong performance in Q2 despite prevailing challenges, with the India business continuing to show robust growth

Shares of Tata Consultancy Services (TCS) traded volatily with a downward bias on Friday after the second quarter (Q2-FY26) bottom line came in below the street's estimates, while margins and revenue came in line.

 

The technology major's stock fell as much as 1.53 per cent during the day to ₹3,014.5 per share, the biggest intraday fall since September 26 this year. TCS stock pared losses to trade 0.9 per cent lower at ₹3.031 apiece, compared to a 0.22 per cent advance in Nifty 50 as of 9:30 AM. 

 

Shares of the company snapped a two-day losing streak and currently trade at 8.4 times the average 30-day trading volume, according to Bloomberg. The counter has fallen 26 per cent this year, compared to a 6.7 per cent advance in the benchmark Nifty 50. TCS has a total market capitalisation of ₹10.9 trillion. 

 

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TCS Q2 results 

India’s largest IT services company reported a consolidated net profit of ₹12,075 crore for the quarter ended September 2025 (Q2FY26), up 1.4 per cent year-on-year (Y-o-Y) from ₹11,909 crore in the same period last year.

 

Revenue for the quarter stood at ₹65,799 crore, marking a 2.4 per cent increase Y-o-Y and a 3.7 per cent rise sequentially. The performance was ahead of Bloomberg’s revenue estimate of ₹65,267 crore but fell short of profit expectations pegged at ₹12,559 crore.

 

The company’s total contract value (TCV) for Q2FY26 came in at $10 billion, up from $9.4 billion in the previous quarter and 20 per cent higher year-on-year from $8.3 billion in Q2FY25.

 

Further, India grew by 4 per cent during the quarter compared to Q1FY26. Vertical growth was driven by BFSI (banking, financial services, and insurance), which grew 1.1 per cent quarter-on-quarter (Q-o-Q), and 1 per cent Y-o-Y. Life Science and Healthcare was up 3.4 per cent Q-o-Q but down 2.2 per cent Y-o-Y. 

TCS to acquire US firm ListEngage for $72.8 mn

The IT major also announced the acquisition of US-based ListEngage for $72.8 million (around ₹646 crore). This strategic acquisition strengthens TCS’ Salesforce capabilities, adding specialisations across the full range of Salesforce marketing tools. 

Analysts on TCS Q2 results 

Nuvama Institutional Equities said that revenue and Ebit margin came in ahead of estimates, while profit was in line. Nuvama said while TCS delivered a decent quarter amid low expectations, its plan to invest in an AI data centre positions it at an interesting juncture. The brokerage trimmed its FY26 and FY27 earnings per share (EPS) estimates by 2 per cent each, citing a slightly weaker growth outlook. 

 

Nuvama maintained its ‘Buy’ rating on TCS, with a revised target price of ₹3,650 (earlier ₹3,950), citing attractive valuations and strong dividend yield. While near-term volatility may persist, it believes the stock remains compelling from a medium- to long-term perspective.

 

Nomura, meanwhile, retained its Neutral stance, noting that management continues to expect FY26 to be better than FY25 for major markets. The brokerage trimmed its FY26 EPS estimate by around 2 per cent to account for restructuring costs expected in the second half of FY26. The brokerage has maintained its target price of ₹3,300. 

 

Motilal Oswal said TCS delivered a strong performance in Q2FY26 despite prevailing challenges, with the India business continuing to show robust growth. While the management indicated that FY26 growth should be better than FY25, the brokerage described this guidance as "somewhat fuzzy." 

 

On the recently announced data centre venture, it said further clarity is awaited on the capital structure, capital expenditure schedule, and details such as potential rentals and signed memorandums of understanding (MoUs). The brokerage noted that valuations remain undemanding and reiterated its 'Buy' rating on TCS with a target price of ₹3,500.