Has the investor sentiment towards the IT sector changed after the TCS Q4 results. BNP Paribas said TCS Q4 performance should be a relief to investors. “Despite recent sector-wide challenges, TCS provides a reassuring outlook driven by steady quarterly performance, a strong close to a difficult year and highly optimistic management commentary.”
The brokerage expects TCS to ‘Outperform’. They have kept the target price for TCS at Rs 3,230, implying an upside of 25% from the current levels.
“While TCS may still lag its peers in revenue growth in FY27, its 5%+ dividend yield makes it an attractive value pick, in our view.” BNP Paribas said.
Apart from TCS, BNP Paribas said their top picks are Infosys and Persistent Systems.
Here are 3 key reasons why BNP Paribas remains positive on TCS.
#1.’Clients not cutting IT spends’, TCS commentary on AI assures investors
One of the reasons for the sharp correction in the tech sector this year was the fear of AI-led disruption . BNP Paribas said that the company is seeing a shift from AI experimentation to scaled deployment, with AI becoming a core part of customer conversations. The report noted that clients are investing in data infrastructure, modernising applications and building systems to become AI-ready. “The clients are not deferring existing IT spending due to new AI model announcements but rather showing willingness to invest and build architecture adaptable to evolving models,” TCS said.
TCS’ AI solutions generated annualised revenue of $2.3 billion in Q4FY26, up from $1.8 billion in Q3FY26.
#2. Minimal impact of geopolitical tensions
Another major concern was the impact of ongoing Middle East conflict on the IT sector. BNP Paribas noted that the direct impact of geopolitical conflict has been limited to the Middle East and the travel and transportation industry, with no major concerns from clients in other verticals.
#3. ‘Headwinds behind us’: TCS signals strong outlook
BNP Paribas also noted TCS management confidence in the outlook ahead may also lift investors sentiments. TCS said, “most of the headwinds we know probably are behind us” and added that it is entering the next year with “a lot of positivity and confidence.”
#4. Salary hike shows TCS’ confidence in sustaining margins
TCS announced a salary hike effective April 1, reflecting its confidence in business momentum. The company expects a margin impact of 150–200 basis points from the wage increase, in line with past trends.
BNP Paribas noted that TCS’ wage hike announcement is a reflection of its confidence in deal momentum, improving demand environment, and its ability to defend margin.
#5. TCS deal wins surge
TCS reported strong deal wins during the quarter, with total contract value (TCV) coming in at $12 billion, up from $9.3 billion in the previous quarter. The book-to-bill ratio stood at 1.57x, supported by three mega deals.
The strong order book was driven by vendor consolidation, cost optimisation and AI-led transformation deals. Client metrics also improved, with an increase in large clients across revenue brackets.
Conclusion
BNP Paribas believes that while TCS may lag peers in revenue growth in FY27, its strong dividend yield of over 5% and improving growth outlook supports the investment case.
The brokerage noted that the company ended a difficult year on a positive note, supported by strong deal wins and improving demand visibility.
DISCLAIMER: The analysis of this report involves specific stock price targets and investment recommendations from a third-party brokerage. These views are for informational purposes and do not constitute a direct offer or solicitation by this publication. Investors are advised to consult a SEBI-registered financial advisor before making any decisions based on price targets or “outperform” ratings, as market conditions and company valuations are subject to significant volatility.
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