TCS Poised for Major Gains: AI Monetisation Fuels Target Hike to ₹3,350 Amid Strong Momentum

TCS Poised for Major Gains: AI Monetisation Fuels Target Hike to ₹3,350 Amid Strong Momentum​

TCS is showing robust momentum, driven significantly by the accelerating monetization of Artificial Intelligence services. Choice Institutional Equities has reiterated a 'BUY' rating, elevating the target price to ₹3,350 on the back of strong deal wins and improving operational visibility.

Analyzing TCS's Financial Upside Potential​

The firm's recent operational performance signals underlying strength, even amid macro uncertainties. Q4FY26 saw TCS report revenue of INR 707.0 Bn, beating the consensus estimate of INR 691.0 Bn. Furthermore, the EBIT figure stood at INR 178.9 Bn, surpassing the expected INR 175.0 Bn, marking a 2.2% development.

The projected growth trajectory remains bullish. Analysts anticipate steady compounding rates across key metrics. Revenue is expected to expand at a CAGR of 5.9% over FY26-FY29E, while EBIT is forecast to expand at 10.0% CAGR over the same period. PAT is projected to grow at an impressive 12.3% CAGR.

AI Integration Fuels Growth Story and Deal Wins​

AI is crystallizing as the primary growth catalyst for TCS. AI-related revenues have reached an annualised run rate of USD 2.3 Bn. This growth is underpinned by accelerating deployment across enterprise transformation, cloud modernization, and digital engineering.

The company's commitment to this area is visible through strategic partnerships with major tech players, including OpenAI, AMD, Google Cloud, and ServiceNow. The introduction of the Human Plus AI service autonomy model showcases practical applications, notably helping a UK retailer slash deployment cycles by 40%.

Robust Order Book and Operational Excellence​

The order book performance solidifies the growth thesis. The TCV for Q4 clocked in at USD 12.0 Bn, reflecting a 29% Quarter-over-Quarter (QoQ) growth. The full-year TCV reached USD 40.7 Bn, supported by five mega deals, including significant contracts with Marks & Spencer and a major US healthcare provider.

Management noted that the structure of the order book is healthy, comprising approximately 50-55% from renewals and 45% from new programs. The EBIT margin for the quarter was 25.3%, demonstrating continued operational discipline and margin strength.

Key Financial Metrics and Analyst Consensus​

Historically, TCS has shown consistent financial health. For FY25, the company reported Revenue of INR 2,553.2 Bn and an EBIT of INR 621.7 Bn. The forecast for FY27 stands at revenues of INR 2,945.4 Bn and EBIT of INR 746.6 Bn.

The Price-to-Earnings (P/E) multiple is projected to contract from 19x in FY26 to 14.7x in FY28. Furthermore, the board has recommended a final dividend of INR 31 per share, bringing the cumulative annual dividend to INR 110 per share.

Sector View and Investment Outlook​

Choice Institutional Equities maintains a Sector View of 'Neutral' for the broader sector. However, the specific outlook for TCS remains highly positive. The combination of strong deal wins, clear AI-led execution, and sustained margin stability provides significant headroom for future earnings expansion.

The historical analysis shows strong sequential operating performance, with both revenues and EBIT consistently improving quarter-over-quarter across the last several fiscal years. The management remains focused on its "Build, Partner, Acquire" framework to secure future growth avenues.

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