Why TCS Stock Is Falling Despite Strong Q2 Results

Tata Consultancy Services (TCS) announced its results for Q2 FY26, and the numbers looked quite solid. The company delivered steady growth, strong margins, healthy cash flows, and added big global deals. Yet, right after the results, TCS’s stock was down by around 1%. Many investors are confused - “If the results were good, why is the stock still falling?” Let’s break this down in a simple way.

TCS Q2 FY26 Results: Steady Growth with Strong Margins and Deal Wins

Tata Consultancy Services (TCS) posted a stable performance in Q2 FY26, supported by solid revenue growth, firm margins, and a healthy deal pipeline.

• Revenue grew 3.7% QoQ to ₹65,799 crore, with constant currency growth at 0.8%, reflecting resilience in a mixed demand environment.
• Net profit rose 1.4% YoY to ₹12,075 crore, with a net margin of 19.6%, showing steady operational efficiency.
• Operating margin improved 70 bps QoQ to 25.2%, driven by disciplined cost control and better execution.
• TCS also reported a total contract value of US$10 billion, pointing to solid deal momentum across markets.
• Declared a dividend of ₹11 per share, record date October 15 and payment on November 4, 2025.

These numbers show that TCS is running a stable, well-oiled machine. Growth is spread across different verticals like Life Sciences, BFSI and Technology. Geographically, the Middle East & Africa (MEA) led growth, with India also doing well. On top of this, TCS announced bold AI investments - including plans for a 1 GW AI data center in India - and won several large, multi-year deals. 

So Why is TCS 'Share falling Today?

1. Investors Are Worried About the Global Demand Outlook

Even though TCS has signed big deals, many global clients are still cautious with their IT spending. Projects are getting delayed, budgets are tight, and decision-making is slow. This creates uncertainty for future revenue, which the stock market dislikes. Investors prefer clear signs of demand recovery before getting excited again.

2. Layoffs and Restructuring Are Seen as a Warning Sign

TCS announced a ~2% workforce cut, affecting more than 12,000 employees, mostly at mid and senior levels. While companies often restructure to stay lean, investors sometimes see layoffs as a signal of slower growth or business challenges. This can create a negative sentiment around the stock in the short term.

3. Global and Regulatory Risks Are Adding Pressure

TCS depends heavily on clients in the US and Europe. Any changes in visa rules, outsourcing policies, or trade tensions can affect future business. These risks may not impact today’s earnings, but they influence how investors value future growth.

4. Profit Growth Is Modest, Not Exciting

Yes, TCS is profitable and stable. But net profit grew just 1.4% YoY this quarter. For a large company like TCS, investors expect either strong earnings acceleration or a clear turnaround signal. When the growth is steady but not spectacular, the stock may not get much buying interest.

5. Big AI Bets Will Take Time to Pay Off

TCS is going big on AI - investing in infrastructure, talent, and new solutions. These are smart moves for the long term. However, the market wants to see clear monetization. AI investments often have long gestation periods. So, while the company is laying the foundation for the future, investors may prefer to wait and watch.

6. Valuation and Technical Factors Also Play a Role

TCS’s stock had already fallen around 30% from its peak earlier this year. After such a slide, some technical indicators show lower highs and lower lows, which keeps traders cautious. Also, some investors feel the valuation is still high relative to the modest growth. This makes them hesitant to step in aggressively.

Bottom Line: Good Company, But Market Wants More

TCS has delivered a steady and well-executed quarter, with strong deal wins and clear long-term bets on AI. But the market is forward-looking. Investors are watching how global demand plays out, how quickly AI initiatives bring in real revenues, and whether profit growth can pick up pace. For now, the stock’s weakness doesn’t reflect poor performance - it reflects cautious sentiment and high expectations.

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