TCS shares fall over 3% post Q4 earnings; CEO says bulk of headwinds behind. What Citi, HSBC, Nomura said

The IT bellwether on Thursday reported a 12.22% jump in its March quarter net profit to ₹13,718 crore (Q4 FY26), supported by expanded profit margins.

For fiscal year 2025-26, its profit after tax (PAT) increased 1.35% to ₹49,210 crore compared to ₹48,553 crore in FY25.

IT major's Chief Executive Officer (CEO) and Managing Director K. Krithivasan said TCS is entering the new fiscal year with positive momentum on the back of new deal signings and asserted that a bulk of the headwinds it had experienced in the recent past are mostly behind it.

Addressing an analyst call, Krithivasan said the impact of the West Asia crisis will be limited to the challenges faced by clients in the travel and transportation segment and those based in the Gulf region.

Net addition of employees

From a headcount perspective, the company added 2,356 jobs in Q4 to take the overall number of employees to 5,84,519 as of March 31, 2026, marking the first quarter of net addition after two consecutive quarters of decline.

In FY26, the overall base declined by 23,460 people.

Layoff plans end

Krithivasan said the company's plan to lay off 2% of its workforce, or about 12,000 people, has ended.

Meanwhile, Chief Financial Officer Samir Seksaria said the "restructuring" costs are limited to ₹1,300 crore, as announced at the end of the December quarter.

TCS Q4: The fine print

TCS is the first company in the $315 billion Indian IT sector to report its earnings for the fiscal year 2025-26, which saw a deepening of artificial intelligence (AI) technologies and subsequent concerns on the employee intensity in the sector, which produces some of the best quality jobs in the economy.

In the reporting quarter, its revenue from operations jumped 9.64% to ₹70,698 crore from the ₹64,479 crore logged in the year-ago period, while the same for the full fiscal jumped 4.58% to ₹2.67 lakh crore.

The operating profit margin expanded to a four-year high of 25.3% in the March quarter, up from 24.2% in the year-ago period.

Seksaria attributed the expansion to a variety of factors, including currency depreciation, and added that the 26% aspiration will be achieved in the "longer term".

"While the macroeconomic headwinds continue, we see sustained customer conviction in technology investments, which positions us well for the opportunities ahead," Krithivasan said.

Deal wins

It signed new deals of $12 billion in the three months to March, led by North America at $5.4 billion and the banking, financial services, and insurance business at $2.8 billion.

AI revenue

On the AI front, the company disclosed that its revenue touched $2.3 billion on an annualised basis in Q4, which is over 6% of its overall revenue.

Attrition and wage hikes

The voluntary attrition stood at 13.7% at the end of the quarter, and the company's Chief Human Resources Officer, Sudeep Kunnumal, said it will be reverting to implementing salary hikes across the organisation from April 1 onwards.

Krithivasan attributed the change to the clarity it has on deal momentum and demand, and added that the senior employees were in the 20% of the staff left out in the last increment cycle, who will get their dues this year.

Seksaria said the top performers will get double-digit hikes, and the overall increments can impact margins by 1.50-2%.

TCS: Dividend details

Its board has proposed a final dividend of ₹31 per share, which takes the overall payout to ₹110 per share.

Analyst views

Investec

Investec said TCS delivered an in-line quarter across revenue, EBIT margins, and earnings, with deal wins remaining robust. While earnings per share (EPS) estimates remain largely unchanged, the investment firm has factored in a lower price-to-earnings (P/E) multiple, reflecting a more moderate long-term growth assumption of around 5%. Despite this, Investec believes the stock continues to offer a favourable risk-reward.

Citi

Citi, in its earnings review report, notes that the company posted an in-line Q4 EBIT performance while forecasting a 2.4% year-on-year decline in FY26 revenues in constant currency terms.

The global investment firm highlighted mixed forward-looking indicators, including a 3.6% YoY rise in trailing twelve-month (TTM) TCV, a 4% YoY decline in headcount, and management’s commentary indicating a positive outlook with expectations of a normal Q1 and Q2.

Citi expects low single-digit revenue growth to persist, adding that the debate around the stock is likely to continue, as TCS’ Q4 performance and commentary offered data points supporting both bullish and bearish views.

HSBC

HSBC states that the company delivered a decent quarter amid widespread pessimism in the IT sector.

The global investment firm believes a stronger exit rate and an improving demand outlook position the company for relatively better performance in FY27 compared to FY26. However, it expects long-term revenue growth to remain in the mid- to low-single-digit range.

Nomura

Nomura noted that the company reported a broadly in-line Q4 performance, with strong deal wins driven by three mega deals.

The global investment firm said management expects FY27 to be better than FY26, particularly in international markets, while continued reinvestment for growth is likely to keep margins around current levels.

Nomura has raised its FY27–28 EPS estimates by 2–3% and expects the usual seasonality of stronger growth in the first half of the year.

It has also increased its dollar revenue growth forecast by 160 basis points to 3.8% for FY27 and by 20 basis points to 4.5% for FY28.