TCS shares rally 5% after Q3 profit rises 12% YoY. Should you buy, sell, or hold?

Shares of Tata Consultancy Services (TCS) rallied 4.7% in early trade on Friday, January 10, reaching a high of Rs 4,227.70 on the BSE, following the IT giant’s report of a 12% increase in its Q3 consolidated net profit to Rs 12,380 crore, up from Rs 11,058 crore a year earlier. This is nearly in line with Street estimates of Rs 12,490 crore.Revenue for Q3FY25 grew by 5.6% YoY, driven by robust TCV performance, strong execution, and cost management. The topline reached Rs 63,973 crore, compared to Rs 60,583 crore in the same quarter of the previous year, though it fell short of the anticipated Rs 64,750 crore.

TCS Q3 TCV Performance

The quarter saw strong growth in Total Contract Value (TCV) despite the seasonally challenging Q3, positioning TCS for long-term growth, according to the company’s filing with the exchanges. The TCV in the reported quarter stood at $10.2 billion, with a book-to-bill ratio of 1.4.

TCS Segment Highlights

Growth was driven by the Consumer Business Group (+1.1%), Energy, Resources, and Utilities (+3.4%), and regional markets (+40.9%). BFSI segment which accounts for TCS’s 30.5% business, reported a 0.9% YoY growth. Life Sciences & Healthcare segment declined by 4.3% YoY.

TCS Growth by Markets

The North America business accounted for 47.7% of revenue in Q3FY25, down 2.3% YoY. The Latin America business grew 7% YoY to 1.9%, and the Europe business rose 4.1%, making up 16.6% of total revenue.

TCS Dividend

TCS has also announced an interim dividend of Rs 10 per share and Rs 66 per share as special dividend to shareholders.

Also Read: Q3 woes: Cement companies may face earnings downgrades again

Should you buy, sell, or hold TCS’s stock? Here’s what analysts say:

Morgan Stanley

Morgan Stanley maintained an ‘Overweight’ rating on TCS with an unchanged target price of Rs 4,660.

The company’s topline missed street estimates, though management highlighted early signs of revival in discretionary spending. The book-to-bill ratio stood at 1.35x in Q3. The stock is likely to remain volatile due to future outlook commentary.

Nomura

Nomura maintained a ‘Neutral’ rating on TCS, reducing the target price to Rs 4,020 from Rs 4,050.

The company reported a modest revenue miss compared to consensus expectations. However, the decision-making cycle is showing improvement with signs of discretionary demand recovery in CY25. The backfill of BSNL revenue remains uncertain in FY26, though margin improvement is likely in the same fiscal year.

Nuvama

Nuvama has maintained a ‘Buy’ rating on TCS, raising the target price to Rs 5,200 from Rs 5,100.

The company reported modest revenue in line with expectations and decent margin expansion. Management is optimistic about the BFSI and retail sectors, expecting both to have bottomed out and to recover over the next few quarters. TCS is maintaining its medium-term margin target of 26-28%, aiming to reach close to 26% in Q4FY25. Nuvama noted that this is the most positive commentary on TCS in two years, which is a positive sign for the entire industry.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)