Gulf War 3 and its impact (while not significant for now as indicated by management), a slowing US economy, tremors in US private credit are all significant overhangs for TCS

From the perspective of a long-term investor, Q4 results is largely a rounding error in the midst of structural AI disruption that is upending the industry.

On that count, the industry and company remain stuck in the purgatory stage for now. While an optimist would like to highlight the 1 per cent beat in Q4 results versus consensus expectations across revenue, EBIT and net income, that is unlikely to enthuse any real investor. The pessimist would highlight how constant currency revenue growth while flattish for the quarter on a year-on-year basis, has actually declined an unprecedented 2.4 per cent for the full year FY26. But this too does not mean much, as this was well expected given the way the FY26 had started. So no surprises or shocks either way.

Gulf War 3 and its impact (while not significant for now as indicated by management), a slowing US economy, tremors in US private credit are all significant overhangs for TCS, but the company has successfully dealt with similar headwinds in the past. But even these these headwinds pale in the context of uncertainty to an investor on what is going to be the long-term revenue growth rate and sustainable margin for the company as AI disruption intensifies. Here no one has clarity, including the management. While they mentioned in the earnings call that the current cycle of AI revenue cannibalising traditional/digital revenue can play out similar to the past cycle when digital revenue cannibalised legacy revenue in the previous decade, they too are uncertain on the timeline of the current cycle.

In the past cycle, it was around a 2-3 year phase during which investor sentiment moved from despair to hope to optimism. While analysts and investors can make some guesstimates on timelines for the current cycle, for now, it is more like throwing spaghetti on the wall. The current disruption is severe and uncertainty is higher than ever.

Investor takeaway

The stock of TCS today trading at ₹2,590 has corrected by nearly 45 per cent from its all time high of ₹4,592, is trading at its cheapest valuation levels in the last 5 years at a trailing PE of 19 times (well below five year average valuation at 30 times), it is a quality company with a quality management. Yet, these are not sufficient balm to make the stock attractive. At bl.portfolio, over the last four years, via many articles on the company and the sector, we had consistently without exception recommended to investors to avoid the stock/sector given unfavourable risk-reward.

With our views well validated over the years, under normal circumstances we would have turned positive at current valuations given significant price and timewise correction, but as explained, current times are not normal. If investors check out other quality global software stocks (IT services or products), many have corrected even more and trade even cheaper.

Accenture which is the global leader in IT services hit a multi-year low on Thursday and trades at a PE of 13.7 times! While business is different, but worth noting, an industry bellwether like Adobe trades at PE of 13.5 times. TCS today, might be cheap relative to its past, but not when investors realise they have options to buy global bellwethers at significantly cheaper valuations. The stock remains a wait-and -watch for now.

Published on April 9, 2026