TCS Q2 FY27 Results Analysis: Revenue Jumps 11.23%, EBITDA Margin Compresses 161 bps
Tata Consultancy Services Ltd's Q2 FY27 numbers came in mixed, with revenue of Rs. 73,188.00 Cr (+11.23% YoY) and PAT growth of +14.98% YoY. Here's a quick read of what worked, what to watch, and what management said.
| Results date | October 08, 2026 |
|---|---|
| Quarter | Q2 FY 2026-2027 |
| Revenue (Q2) | Rs. 73,188.00 Cr (+11.23% YoY) |
| PAT (Q2) | Rs. 13,884.00 Cr (+14.98% YoY) |
| EBITDA margin | 25.71% (-161 bps YoY) |
| EPS (Q2) | Rs. 38.98 (+19.20% YoY) |
| Market cap | Rs. 749,781.42 Cr |
| CMP | Rs. 2,076.00 |
Quarter Snapshot
Revenue grew 11.23% YoY to Rs.73,188 cr with sequential turnarounds in Manufacturing (+3.32% QoQ) and Life Sciences (+2.15% QoQ), and operating margin recovered from Q1's 22.66% to 23.64% as management guided. However, margin remains below the 26-28% aspirational band as other expenses rose 34.95% YoY to 15.21% of revenue, compressing EBITDA margin 161 bps YoY to 25.71%. H1 FCF of Rs.23,768 cr funded Rs.15,558 cr in dividends while the €320 million MHP acquisition awaits regulatory closure.
Key Investment Insights
Key Positives
- Revenue grew 11.23% YoY to Rs.73,188 cr, accelerating from FY26's 4.6% run-rate; BFSI (+3.19% QoQ) and Manufacturing (+3.32% QoQ) led sequential growth
- PAT attributable to owners grew 14.98% YoY to Rs.13,884 cr and EPS grew 19.20% YoY to Rs.38.98 (normalized PAT growth +7.36% adjusting for the year-ago Rs.1,135 cr restructuring charge)
- Operating margin recovered from Q1's 22.66% to 23.64%, confirming management's Q1 guidance that margin would inch up after the Q1 trough
- Manufacturing (+3.32% QoQ) and Life Sciences & Healthcare (+2.15% QoQ) turned around sequentially as guided; zero exceptional items in Q2 FY27
- H1 FCF of Rs.23,768 cr (CFO Rs.25,801 cr less capex Rs.2,033 cr) funded Rs.15,558 cr in dividends; company is debt-free with Rs.54,640 cr in liquid assets
- Employee costs declined 0.59% QoQ as the annual wage increment cycle (170 bps Q1 margin impact) was fully absorbed; employee cost growth of +8.51% YoY lagged revenue growth of +11.23%
- Agreement signed to acquire MHP GmbH for €320 million (~Rs.3,484 cr) enterprise value, pending regulatory approvals; second interim dividend of Rs.12 per share declared
Risk Factors
- Operating margin of 23.64% missed management's aspirational 26-28% band and remains below the CFO's 'exit above 25%' threshold; clean operating margin down 119 bps YoY
- Other expenses grew 34.95% YoY (vs revenue +11.23%), rising from 12.54% to 15.21% of revenue over five quarters
- EBITDA margin compressed 161 bps YoY to 25.71%; margin compression was broad-based across 5 of 6 segments YoY, with 'Others' down 685 bps
- Consumer Business revenue flat (-0.08% QoQ) and 'Others' declined 7.69% QoQ, consistent with the retail/consumer weakness flagged in Q1
- Normalized PAT growth of +7.36% trails revenue growth of +11.23%; reported +14.98% is flattered by the year-ago restructuring base
- Working capital build: H1 CFO/PAT at 0.94x vs FY26's 1.05x; balance-sheet DSO ~86 days vs 74 days disclosed in Q1
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Disclaimer: This results analysis is published for educational and informational purposes only. It is not investment advice, not a recommendation to buy, sell or hold any security.