TCS Shares Climb as Company Aims for Global AI Leadership; Price Target Noted
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Tata Consultancy Services shares saw a boost following the announcement of its AI-focused strategy. Analyst target price remains unchanged.
Tata Consultancy Services (TCS) has announced an ambitious plan to become the world's leading AI-driven technology services company, leading to a rise in its share price. TCS stock increased by almost one percent to reach Rs 3,238 on the Bombay Stock Exchange (BSE) on Thursday, December 18, after the IT giant presented its new AI strategy.
The company's Analyst Day event detailed the shift from traditional digital services to a focus on AI-centric enterprise transformation. This transformation is built on a five-pillar strategy:
- Internal AI adoption
- AI-driven services
- Building future-ready talent
- Real-world client use cases
- Ecosystem expansion through partnerships
TCS reports significant progress in its AI business, noting over 5,000 AI engagements and an annualized revenue run rate of roughly $1.5 billion, representing a 16.3% quarter-on-quarter growth rate. Already, approximately 85% of TCS's largest clients, those spending over $20 million annually, are utilizing AI solutions.
To improve productivity and maintain profit margins, TCS is redesigning its service delivery models. The company is moving away from tool-assisted automation towards agentic and autonomous AI models.
Execution of this strategy includes scaling up AI capabilities across the workforce. TCS has trained nearly 180,000 employees in advanced AI skills and is increasing its advisory and consulting teams. The company is also actively pursuing acquisitions to strengthen its AI service offerings, particularly in high-growth areas and segments like Salesforce.
Despite increased investment in AI, TCS has reaffirmed its target margin of 26–28% and its commitment to returning 80–100% of free cash flow (FCF) to shareholders, highlighting its dedication to both innovation and financial discipline.
Following the announcement, domestic brokerage firm Nuvama reiterated a 'Buy' rating on TCS stock, maintaining its target price of Rs 650. This valuation is based on 23 times the projected price-to-earnings ratio for fiscal years 2027 and 2028.
Nuvama emphasized that significant enterprise tech debt and unrealized cloud adoption offer a substantial opportunity for AI-driven modernization. The brokerage firm believes TCS is well-positioned to capitalize on any potential recovery in tech spending.
