Accumulate Tata Consultancy Services Ltd for Target Rs. 3,600 by Elara Capital
AI revenues ~5% of the topline
Tata Consultancy Services ( TCS IN) outlined the following aspirations during its A nalyst Day : 1) it reiterated its goal to be the world’s largest AI -led technology services company , 2) entr y into the data center space is a function of huge opportunities as well as gaining access in AI - related infrastructure , 3) inculcating AI -first culture across organization and emphasis on training & adding skills to build future -ready , AI -led tech firm, and 4 ) AI models moving from automation to autonomy where systems have decision -making ability under human supervis ion . TCS’ annualized AI revenue reached USD 1.5bn and grew >15% QoQ in Q2FY26. We retain Accumulate with a n unchanged TP of INR 3,600.
Gaining leadership in full-stack AI services from infrastructure to intelligence: TCS is positioning itself as a full -stack AI player, extending beyond services into the infrastructure layer with strategic AI data center investments. The company has generated USD 1.5bn annualized AI revenue with 16.3% QoQ growth in Q2FY26, while company’s growth was 0.6% QoQ. Its next -gen services portfolio, including AI, cloud & cyber, reached annualized revenue of USD 11bn driven by 38.2% YoY growth in AI services. TCS has executed ~5,500 AI engagements and is moving up the value chain by helping clients anchor AI to their strategy, with 85% of Top USD 20mn clients and 54 out of 60 >USD 100mn clients already leveraging TCS for AI work .
Building AI-First culture: T CS is embedding an AI -first culture by providing AI access to its entire workforce of ~ 600K employees and host ed the world’s largest AI hackathon with 280K participants, generating 170K+ builds and 500K submissions evaluated by AI . It has trained 100% of customer -facing teams, upskilled 180K employees in advanced AI skills (up from 80 K last year ), doubled AI -native graduate intake and launched programs like AI Dojo to transform roles across sales, advisory, and delivery . Initiatives like "AI Fridays" , the weekly gamified hackathons in physical AI labs , and personalized learning coaches reinforce this cultural shift .
Margin levers & capital allocation: Management remains committed to 26 – 28% EBIT margin target (currently 25.2%), leveraging levers , such as pyramid optimization, utilization, and SG&A control. While TCS invests USD 1bn annually into learning & development ( L &D), research, and specialized infrastructure , this cost is partly offset through operational efficiency and repurposing existing spending . Furthermore, it maintains its capital allocation policy, targeting a return of 80 -100% of free cashflow to shareholders’ post - investments .
Retain Accumulate with a TP of INR 3,600: TCS ’ annuali zed AI revenue contributes ~5% of its overall top line and is growing faster than the company’s growth rate , which is impressive , in our view . However, it implies non -AI revenue is flat sequentially in Q2 (i.e -0.1%), which is cause for concern . Accenture’s AI revenue has reached USD 2.7bn and it contributes ~4% of its top line, which mean s TCS ’ AI scaleup appears faster than Accenture ’s. The company’s AI revenue need s to sustain momentum to offset revenues losses in the traditional application development and maintenance (ADM ), testing revenue in the medium term. We maintain Accumulate with a n unchanged TP of INR 3,600 on 2 6x FY27E P/E. Key risk is slower -than - expected growth
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SEBI Registration number is INH000000933
