TCS Q2 Performance: How The IT Giant Has Fared Over The Last Five Years

Tata Consultancy Services (TCS) is set to announce its second-quarter results for FY27 on Thursday, with the IT major coming into the earnings season after a difficult year for technology stocks. A look at TCS' performance during the September quarter over the last five years shows how sharply the growth environment has changed, from double-digit expansion in the post-pandemic period to muted growth in recent quarters.

TCS' Q2 performance was particularly strong in fiscal 2023. Revenue rose 8.6% year-on-year in dollar terms and 15.4% in constant currency, while operating margin stood at 24%. Net income was largely flat at $1.3 billion as wage and supply-side pressures weighed on profitability. The company had then described demand as strong across industries and geographies.

The following year brought a moderation in growth. In Q2 fiscal 2024, revenue increased 4.8% year-on-year in dollar terms and 2.8% in constant currency, while operating margin improved to 24.3%. TCS also reported a $11.2 billion order book, its second-highest quarterly total contract value at the time, indicating that large deal momentum remained relatively healthy even as clients became more cautious.

The September quarter of fiscal 2025 was more resilient. Revenue rose 6.4% year-on-year in dollar terms and 5.5% in constant currency to $7.67 billion. However, operating margin slipped to 24.1% from 24.3% a year earlier. BFSI showed signs of recovery, while manufacturing and energy were among the stronger verticals. North America, the company's biggest market, remained under pressure, declining 2.1% in constant currency.

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The biggest improvement came in Q2 FY26. Revenue rose 3.7% sequentially to Rs 65,799 crore, with constant-currency growth of 0.8%. Operating margin expanded sharply to 25.2%, while net income rose 8.4% year-on-year to Rs 12,904 crore. Total contract value reached $10 billion, with BFSI and technology and services among the key growth areas.

This five-year history suggests that TCS' September quarter is no longer automatically a period of strong growth. Instead, Q2 has increasingly become a test of how quickly clients are willing to convert large technology programmes into revenue.

TCS Share Performance

The stock's performance during September quarter also reflects this changing investor perception. Based on the five-year data, TCS shares have declined an average 5.45% during Q2. The stock fell 12.78% in Q2 FY23, declined 4% in Q2 FY26 and is down 14.04% during Q2 FY27 so far. In contrast, it gained 2.95% in Q2 FY24 and 0.63% in Q2 FY25.

The sharp fall ahead of the FY27 results means expectations have already been reset significantly. TCS shares have also corrected about 11% since the Q1 FY27 results, according to recent market reports.

What To Expect From Q2 FY27

Bloomberg estimates suggest revenue rise 1.2% quarter-on-quarter to Rs 73,152 crore from Rs 72,275 crore, while EBIT is projected to increase 2.8% to Rs 17,802 crore from Rs 17,317 crore. EBIT margin is expected to expand to 24.33% from 24% in the previous quarter. The net profit is estimated to rise 3.3% to Rs 13,794 crore, compared with Rs 13,349 crore in Q1.

Margins will be a key watchpoint. TCS entered FY27 with a 24% operating margin in Q1 after wage hikes, while management has maintained a longer-term target of exiting FY27 at 25% or higher. Analysts expect sequential stability or a modest improvement in Q2, although margins remain vulnerable to pricing pressure, wage costs and acquisitions.

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Deal wins will arguably matter more than the headline revenue number. TCS reported $9.5 billion of TCV in Q1, and analysts expect Q2 TCV to move towards $10-11 billion. The ability to convert these large contracts into revenue will be closely watched, particularly as clients remain cautious about discretionary technology spending.

AI is another crucial variable. TCS' annualised AI services revenue had reached $2.6 billion in Q1 FY27, up 13.6% sequentially. Investors will want to know whether AI is creating incremental revenue opportunities or simultaneously putting pressure on traditional pricing and billable-hour models.

BFSI could remain a relative support, while consumer-facing businesses and communications may continue to be softer. Manufacturing recovery, international markets, BSNL-related work and the ramp-up of large deals will also be important indicators of the demand environment.