Tata Consultancy Services (TCS) shares fell 1% in opening trade on Friday after the IT bellwether posted a solid performance in the September quarter (Q2 FY26), beating market estimates. This was led by improving profitability, a strong order book & AI-led transformation focus. 

Q2 profits rose 1.7% year-on-year (YoY) but fell 5% quarter-on-quarter (QoQ) to ₹12,075 crore, with revenues increasing 3.7% (QoQ) to ₹65,799 crore. Margins were steady at 24.76% and India's largest IT services company declared a second interim dividend of ₹11 per share, with October 15 as the record date, and payable on November 4. 

The company reported total contract value (TCV) of $10 billion for the quarter, with multiple large deals across sectors. However, growth in its biggest market, North America, slowed slightly.

TCS CEO K Krithivasan said,“We're on a journey to become the world's largest AI-led tech services company.” They are focusing on AI, talent building, and partnerships to drive long-term growth. The company ended the quarter with 6.13 lakh employees and an attrition rate of 13.8%. 

How To Trade TCS Stock?

SEBI-registered analyst Mayank Singh Chandel believes that TCS stock is showing signs of recovery. And a breakout above ₹3,203 could mark the beginning of a new uptrend. 

He noted that TCS stock has been in a downtrend since September 2024, trading below its 100 & 200-day Exponential Moving Average (EMA), which shows weakness on the higher timeframe. But now it's finding strong support around ₹3,030 to ₹2,915, a zone where buying interest is visible. The Relative Strength Index stood above 50, suggesting that momentum is improving. 

For a safer entry, Chandel advised traders to wait for a breakout above ₹3,203, which could confirm a fresh upside move.

Rerating On The Cards

Front Wave Research believes that TCS has bottomed out and is entering its next curve of growth: from cash preservation to capacity creation. 

Over the past decade, TCS has produced cumulative operating cash flows of ₹3.44 lakh crore, with free cash flow at ₹3.17 lakh crore, which translated into an impressive free cash flow conversion rate of approximately 92%. 

This performance ranks TCS among the highest globally for large-cap IT companies, they highlighted. It has also been a consistent compounding engine, earning and retaining cash faster than it could deploy. 

Front Wave flagged that despite generating more than ₹45,000 crore in annual free cash flow, TCS's capital reinvestment ratio has historically stayed within the 6–10% range, which showed significant underutilisation of funds. And the time seems ripe to put it into action. 

TCS announced its plans for AI dominance and will be building a 1 GW AI data-centre build-out in India, its biggest capacity initiative in over a decade. Front Wave noted that this follows global playbooks similar to those of Google, Meta, and Amazon, which have funnelled surplus capital into data-infrastructure expansion. The analysts believe that this pivot could unlock a new volume-growth driver: moving from people-linked billing to infrastructure-linked scalability.

What Is The Retail Mood?

Data on Stocktwits shows that retail sentiment remained 'neutral' on this counter amid 'high' message volumes. 

TCS shares have declined 25% year-to-date (YTD), primarily due to tariff and H1-B visa concerns in the US. 

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