Tata Consultancy Services (TCS) is expected to report healthy margin expansion despite only modest revenue growth in the September-ending quarter, according to analysts. The company’s performance is likely to be shaped by ongoing investments in the business and geopolitical developments.
Tier-1 IT companies are expected to report modest growth of around 1 per cent this quarter, with TCS seen as a laggard, posting revenue growth of just 0.4-0.6 per cent. This is largely attributed to continued business investments, the slow ramp-up of large deals, pricing pressures, and weakness in the Middle East market, according to PL Capital.
While steady execution in the BFSI, technology and services segments is expected to support growth, softness in the consumer vertical may offset some of the gains. However, rising AI-related revenues are expected to provide support.
“Annualised AI services revenue is likely to maintain its strong momentum (after growing more than 13.6 per cent sequentially in Q1), driven by increasing demand for AI-led modernisation, autonomous GBS, cybersecurity and sovereign cloud offerings,” said Motilal Oswal Financial Services.
Analysts estimate margin expansion of 40-100 basis points (bps), taking margins to the 26-28 per cent range.
“Continued investments in AI capabilities, talent and partnerships could act as a drag on margins,” it said.
Further, total contract value (TCV) is expected to come in at $8-11 billion, representing about 5 per cent growth, supported by the Porsche mega deal.
“Deal wins are likely to remain strong, led by large contracts from MHP, BSNL and Metro. We will closely watch the growth outlook for BFSI and developed markets,” said Nuvama Research, which noted a slower-than-expected recovery in the latter part of the quarter amid heightened geopolitical uncertainty.
However, JM Financial expects the ramp-up of the BSNL project to be delayed until Q3, with operational efficiencies providing some support to margins. Meanwhile, Anand Rathi expects a front-loaded quarter, with strong momentum in July and August followed by a softer September.
Kotak Institutional Equities advised investors to focus on TCS’s ability to sustain margins amid pricing pressure and incremental investment requirements; the extent of productivity concessions in contract renewals; the share of the portfolio repriced for AI; the profitability of recent mega deals; the impact of GCC ramp-ups; progress on data-centre investments; and further details on the Porsche partnership and acquisition.
Published on October 7, 2026
