TCS Q1 FY27 Profit Rises 4.6% to ₹13,349 Crore; AI Revenue Hits $2.6B

Tata Consultancy Services posted Q1 FY27 net profit of ₹13,349 crore, up 4.6% year-over-year, as the company scaled its AI business to a $2.6 billion annualized revenue run rate. Revenue climbed 13.9% to ₹72,275 crore, driven by strong demand for AI-led transformation deals. The board declared an interim dividend of ₹12 per share, with a record date of July 15, 2026. Meyka grades TCS stock A with a 12-month forecast of ₹3,291, suggesting upside from current levels near ₹2,068.

AI revenue accelerates to $2.6 billion run rate

TCS annualized AI revenue reached $2.6 billion in Q1 FY27, up 13.6% quarter-on-quarter, as enterprises scaled AI deployments from pilot to production. The company won multiple large transformation deals, including an $800 million AI-led business transformation contract with SKF, the Swedish bearings and industrial technology company. CEO K. Krithivasan said the quarter reflected “continued growth momentum” despite geopolitical headwinds, with customers accelerating investments in AI, modernization, cybersecurity, and sovereign cloud.

Revenue beats estimates despite weak constant currency growth

Consolidated revenue of ₹72,275 crore grew 13.9% year-over-year but only 2.2% quarter-on-quarter in rupee terms. On a constant currency basis, sequential growth was just 0.4%, reflecting a weaker rupee and cautious client spending. Operating margin held steady at 24%, while net margin stood at 19.2%. The company’s total contract value for the quarter reached $9.5 billion, signaling a strong deal pipeline ahead.

Workforce adjustments and margin pressure from wage hikes

TCS workforce strength fell to 593,798 from 613,069 a year earlier, as the company optimized headcount amid automation and AI adoption. Attrition in IT services remained at 13.6% on a last-twelve-months basis. EBIT margin contracted 130 basis points to 24% from 25.3% year-over-year, driven by annual salary increments and alignment with India’s new Labour Code requirements. Despite margin pressure, JPMorgan retained its Overweight rating with a ₹2,400 target, citing AI-led deal wins and expected FY27 growth acceleration.

Dividend and analyst views diverge on near-term outlook

The board approved an interim dividend of ₹12 per share, payable July 31, 2026 to shareholders on record as of July 15. Morgan Stanley maintained Equal Weight with a ₹2,200 target, flagging EBIT margin downside risks and limited revenue growth visibility. Meyka’s A-grade and ₹3,291 yearly forecast suggest the market may be undervaluing TCS’s AI transformation potential relative to analyst consensus.

Final Thoughts

TCS delivered solid Q1 results with AI revenue scaling rapidly, but constant currency growth of 0.4% and margin compression signal near-term headwinds. With Meyka grading the stock A and forecasting ₹3,291 annually versus analyst targets of ₹2,200 to ₹2,400, the data points to asymmetric upside if AI deal momentum sustains.

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