Buy TCS; target of Rs 3500: Motilal Oswal

Motilal Oswal's research report on TCS

TCS reported revenue of USD7.5b in 2QFY26, up 0.8% QoQ in CC terms vs. our estimate of 1.0%. Growth was led by the Life Science and Healthcare vertical (up 3.4% QoQ CC). Technology & Services/Manufacturing/BFSI grew 1.8%/1.6%/1.1% QoQ CC. TCS will incorporate a wholly-owned subsidiary to build a 1GW capacity AI data center in India (current datacenter capacity in India: 1GW). EBIT margin was 25.2% (up 70bp QoQ), above our estimate of 24.3%. Adj. PAT rose 1.1% QoQ/8.4% YoY at INR130b (above our estimate of INR126b).

Outlook

At present, we do not model data center investments or related revenue into our forecasts. Valuations are undemanding, and we reiterate our BUY rating on TCS with a TP of INR3,500, implying a 15% potential upside.

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