Synopsis:
TCS is in focus after announcing its largest-ever layoff of 12,261 employees amid AI disruptions and global headwinds, with analysts offering mixed views on its future outlook.
A large-cap IT stock is in the spotlight today following reports of workforce layoffs and a revised target from analysts. Read the article below to learn more about the developments and the updated outlook shared by analysts.
With a market capitalization of Rs. 11,23,054 crores, the shares of Tata Consultancy Services were trading at Rs. 3104, down by 1 percent from its previous closing price of Rs. 3135.80.
What’s the news?
The largest IT services provider in India, TCS, plans to lay off 12,261 workers, or roughly 2 percent of its workforce, in its largest layoff to date. The company cites AI disruptions and global economic uncertainties that are affecting business demand.
TCS CEO K Krithivasan stated that while the changes are part of strategic initiatives required for the company’s growth, they recognize the impact on employees, valuing their contributions, and are committed to supporting them through the transition.
Analyst Outlook
With a target price of Rs. 3,705, Investec maintained its Buy rating. They think that TCS will increase efficiency by laying off 12,000 workers, which they see as a normal move because of skill mismatches. They believe that this move will better utilize the company’s resources and can only have a minor, short-term effect on margins.
Citi kept its rating at Sell, with a target of Rs. 3,135. They share the CEO’s belief that the layoffs are necessary to make the business more flexible and future-ready, not to reduce costs or use AI. Citi, however, is worried about persistent problems in the IT industry, such as declining productivity, a lack of skilled workers, and pressure on earnings. They continue to express caution regarding the company’s cash flow and margins and highlight the poor Q1 results.
About the company
Tata Consultancy Services (TCS), a part of the Tata Group and founded in 1968, is a global leader in digital transformation and technology services. With 180 delivery centers and more than 607,000 consultants dispersed throughout 55 countries, TCS is well-known for its innovative thinking, engineering prowess, and solid customer relationships. The company forms long-lasting partnerships and helps clients adapt to every stage of technology, from mainframes to artificial intelligence.
Tata Consultancy Services (TCS) reported revenue of Rs. 63,437 crore in Q1 FY26, a 1.3 percent increase from Rs. 62,613 crore in Q1 FY25, but a 1.6 percent decline from Rs. 64,479 crore in Q4 FY25. The net profit stood at Rs. 12,819 crore, up 4.28 percent from Rs. 12,293 crore in the previous quarter and 5.9 percent higher than Rs. 12,105 crore in Q1 FY25.
At the moment, the company’s P/E ratio is 22.8x slightly lower as compared to its industry P/E 27.5x, and its ROE and ROCE are 52.4 percent and 64.6 percent, respectively. The D/E ratio of the company stands at 0.10.
In short: As a result of disruptions from AI and shifting global demand, TCS intends to lay off 12,261 workers, or 2 percent of its workforce. Citi is cautious, pointing out structural industry issues and keeping a Rs. 3,135 target, while Investec views this as a positive efficiency move with a Rs. 3,705 target.
Written By Akshay Sanghavi
Disclaimer
The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
