TCS shares slip as Q1 misses street forecast; should you buy, hold or sell?

Kotak Institutional Equities expects FY2026 to be a year of underperformance for TCS, after its Q1 results missed expectations

Shares of Tata Consultancy Services (TCS) slipped in Friday's session as the technology giant's first quarter earnings missed street's expectations amid macroeconomic uncertainty and slow discretionary spending. 

 

TCS' stock fell as much as 2.43 per cent to ₹3,299 per share in morning deals, leading the fall in the broader technology gauge, Nifty IT index. As of 9:30 AM, the stock was down 1.8 per cent at ₹3,320, compared to 0.20 per cent decline in the benchmark Nifty50 index. The stock registered the steepest intraday fall since May 13. 

TCS Q1 results breakdown

The stock plunge came a day after the tech major posted ₹12,760 crore net profit, sequentially, for the first quarter (Q1) of the financial year 2025-26 (FY26), an increase of 4.4 per cent. However, on a quarter-on-quarter (Q-o-Q) basis, revenue declined by 1.6 per cent to ₹63,437 crore, a slightly steeper drop than analysts had anticipated. 

 

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TCS missed Bloomberg consensus estimates on revenue but beat expectations on net profit. Bloomberg had projected revenue of ₹64,655 crore and net profit of ₹12,253 crore. 

 

The company’s Q1 performance across major markets remained weak, in line with the earlier quarters. The US and Europe continued to be soft. Revenue from India declined 21.7 per cent Y-o-Y, primarily due to the ramp-down of the BSNL deal. 

 

In terms of the order book, the total contract value (TCV) for the quarter stood at $9.4 billion, in line with expectations and up 13 per cent Y-o-Y.  

Uncertainties weigh on operation: TCS commentary

Delays in decision-making and project starts in terms of discretionary investments have continued and intensified this quarter, with global business facing disruptions due to conflicts, economic uncertainty, and supply chain issues, K Krithivasan, TCS’ chief executive officer and managing director, said. He added that the sequential decline of 3 per cent in revenue was due to a 0.5 per cent Q-o-Q fall in international business and a 2.8 per cent drop in domestic business.

Analysts on TCS earnings and outlook

The brokerage believes that while TCS missed revenue estimates, primarily due to the impact of the BSNL deal, it delivered a margin beat, supported by steady execution. Total contract value (TCV) of deal wins was healthy at $9.4 billion. The brokerage noted that TCS remains well positioned for medium-term growth, supported by its large order book, portfolio strength, and exposure to long-duration contracts. 

 

Emkay Global noted that TCS’s first-quarter performance for FY26 fell short of expectations, with revenue  coming in below its estimates. The brokerage highlighted intensified trends of project deferrals, scope reductions, and decision delays during the quarter, which led to lower-than-expected revenue conversion. 

 

Meanwhile, Kotak Institutional Equities expects FY2026 to be a year of underperformance for TCS, lowering its revenue growth forecast (excluding the BSNL deal) to -0.1 per cent from 3 per cent earlier. This places the IT major behind peers such as Infosys and HCL Technologies.

 

The brokerage noted that TCS’s historical edge over competitors has narrowed in recent years, as peers have improved execution capabilities and caught up in areas like large deal structuring and digital services. It also flagged rising competitive intensity, with both mid-tier firms becoming more aggressive and Tier-1 players stepping up their game.