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TCS Beats Q2 Revenue Estimates, Forecasts Stronger Growth in H2 FY26

Mumbai: Tata Consultancy Services (TCS), India’s largest software services exporter, exceeded second-quarter revenue expectations, buoyed by strong performance in its banking, financial services, and insurance...

Oct 10
3 min read
TCS Beats Q2 Revenue Estimates, Forecasts Stronger Growth in H2 FY26

Mumbai: Tata Consultancy Services (TCS), India’s largest software services exporter, exceeded second-quarter revenue expectations, buoyed by strong performance in its banking, financial services, and insurance (BFSI) vertical, and signaled optimism for the second half of fiscal 2026.

The results come as a morale boost for India’s $283 billion IT sector, which has faced sluggish client spending amid economic uncertainty in North America, its largest market.

Key Financial Highlights

  • Q2 Revenue: ₹657.99 billion ($7.4 billion), up 2.4% sequentially, above analysts’ estimate of ₹650.86 billion.

  • Net Profit: ₹120.75 billion, a 1.4% increase, though slightly below the expected ₹126.29 billion, impacted by ₹11.35 billion in severance costs.

  • Segment Performance:

    • BFSI vertical revenue rose 1%, contributing about a third of TCS’ total business.

    • Consumer, healthcare, and manufacturing verticals saw declines of 2.9%, 2.2%, and 1.1%, respectively.

  • Employee Count: Fell 19,755 sequentially, marking the company’s largest-ever quarterly reduction, reflecting TCS’ July plan to trim 2% of its workforce (~12,200 middle and senior management positions).

  • Order Bookings: Totaled $10 billion, up from $9.4 billion in Q1 and $8.6 billion a year ago, showing resilience despite ongoing industry headwinds such as proposed 25% outsourcing taxes and H-1B visa reforms.

Leadership Commentary

CEO K. Krithivasan highlighted improving client engagement and reduced project deferrals compared to Q1.

“We have had better growth compared to Q1. Macros have not changed much, but our deep engagement with clients and AI solutions give us confidence to improve growth momentum in the second half of the fiscal year.”

Analyst Piyush Pandey (Centrum Broking) noted,

“If there are no more tariff-related surprises, Indian IT should gradually recover. TCS’ revenue and operating margins came in above expectations, signaling positive sentiment for the sector.”

Strategic Initiatives

TCS announced plans to establish a dedicated AI infrastructure entity, which will include building a 1 GW data centre in India over five to seven years.

“Once functional, 1 GW in capacity will position TCS among India’s top-five data center operators, likely involving a capital expenditure of approximately $5 billion,” analysts at Jefferies said.

This move underscores TCS’ long-term investment in AI and cloud capabilities, reinforcing its strategy to diversify revenue streams beyond traditional IT services.

Sector Impact

TCS’ strong Q2 revenue and order book provide cautious optimism for the broader IT sector, which has faced multiple challenges:

  • Sluggish North American demand.

  • Proposed outsourcing taxes and H-1B visa restrictions.

  • Rising employee attrition and cost pressures.

The company’s AI and data center initiatives are expected to enhance its technology leadership and competitive positioning, setting a benchmark for the sector.