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TCS’ 4Q revenues (-0.8% cc QoQ) missed estimates (JMFe: -0.1%). Miss was attributable to higher than expected BSNL ramp-down (India revenues: -14% QoQ; cc terms). International revenues were in-line, though undershot management’s quarter beginning expectations. Elevated uncertainty notwithstanding, management believes FY26 growth, at least ex-BSNL, will be better than FY25’s (c.1.5% cc QoQ). Record deal wins (Q4 TCV: USD 12.2bn), strong order backlog (Last 24-months book-to-bill: 1.38x) and receding client specific challenges underpin their confidence. Decision delays in back-half of 4Q however reflects in elevated leakages, per our TCV-revenue waterfall model. That could stay, clouding FY26 prospects. That said, such is the strength of TCS’ order backlog that even if leakages were to sustain, its FY26 revenue visibility is c.90% of FY25 ARR currently, per our estimate. That should lend stability to TCS’ performance in the current environment. We therefore believe TCS offers maximum safety among IT Services stocks at this stage. For investors too, safety should take precedence over growth. We have cut FY26E revenues growth expectations from 3% to 1%, to factor higher leakages and softer 1Q. That is flowing to 4-5% cut to our FY26-27E EPS. Scope of further earning downgrade appears limited for TCS. Besides, at 5% discount to 10- year median PER, valuations are reasonable too. Maintain BUY with revised TP of INR 4,060.

* 4QFY25 – no major hiccups, yet: TCS reported 0.8% cc QoQ decline in revenues, vs JMFe/Cons. estimates of -0.1%/-0.3%. India revenues declined 14% (cc QoQ), down USD 112mn in absolute terms. This, we believe, reflects higher than expected BSNL decline. Ex-India, revenues were up c.0.8% QoQ (cc). International growth was led by BFSI (+1.3% QoQ; USD terms) while Consumer, Communication, Manufacturing and HLS (Healthcare & Lifesciences) all declined 1% QoQ. EBIT margin declined 30bps QoQ to 24.2%, despite lower BSNL contribution. Promotions (-100bps QOQ) and specific expenditure e.g marketing/CSR (-60bps) were headwinds while lower pass-through cost (- 120) and FX (+40) were margin tailwinds for the quarter. PAT came in at INR 122.bn, marginally missing JMFe: INR 123.5bn. TCS declared INR 30 DPS.

* Outlook – achievable, not aspirational: TCS won USD 12.2bn of TCV, second highest ever, despite no mega deals. TCS has won USD 82bn of TCV in past two years at a bookto-bill of 1.4x, which improves its revenue visibility substantially, in our view. Management therefore sounded confident of achieving higher growth in FY26 (at least ex-BSNL) vs FY25. That said, visibility getting into Q1 is weaker than same time last year. This reflects in higher leakage. Our TCV-revenue waterfall model suggests that even if the leakages were to sustain, management’s assertion appears achievable. Margin miss, despite lower BSNL revenues, is surprising, as none of the headwinds were unanticipated. Wage hike deferral, better revenue mix however should aid margin expansion in FY26.

* Cut EPS by 4-5%; maintain BUY: We now build 4% cc YoY ex-BSNL growth for FY26, translating into consol. growth of c.1% (down from 3% earlier). Limited change to our margin estimates result in 4-4.6% cut to our FY26-27E EPS. We see limited, if any, scope of EPS downgrades for TCS now. Valuations have limited downside too. BUY.

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