Top IT Firm Positions Itself for Growth

TCS benefits from rising cloud migration deals.

Macquarie has chosen Tata Consultancy Services Ltd. (TCS) over Infosys Ltd. due to a stronger recovery in spending trends following the Covid-19 pandemic and global financial crisis. The brokerage has named TCS its top choice among large-cap IT services firms and a Macquarie Marquee idea, with an ‘outperform’ rating. Macquarie has set a target price of Rs 5,740 per share, suggesting a potential 27.2% increase.

As spending rises, Macquarie anticipates that cloud migration deals will increasingly combine applications and infrastructure services, with TCS seen as being in a better position than Infosys to benefit from this trend.

The brokerage expects Tata Consultancy Services (TCS) to outpace Infosys in growth for fiscal years 2026 and 2027. According to the firm, as clients’ IT spending increases in calendar year 2025, standalone application deals are likely to decrease, with the fastest-growing market segment expected to involve bundled deals combining application services and infrastructure management.

TCS is seen as having an advantage over Infosys in these bundled deals, especially in infrastructure management services (IMS), including data center management.

TCS is currently trading at 27.6 times its fiscal 2026 price-to-earnings ratio, slightly higher than Infosys at 27.4 times. The brokerage notes that this suggests investors view the two companies as having similar risk and growth profiles, though they see TCS offering lower risk due to its more stable unbilled Days Sales Outstanding (DSOs) compared to Infosys.

Despite TCS being favored by the brokerage, its stock has underperformed compared to Infosys both year-to-date and over the past 12 months. TCS shares have gained 15.58% year-to-date and 24.27% over the last 12 months, whereas Infosys has seen a rise of 23.2% year-to-date and 32.4% over the same period. In today’s trading, TCS shares declined as global markets await the outcome of the Federal Reserve’s meeting, with uncertainty surrounding the extent of the U.S. benchmark interest rate cut.

TCS shares dropped as much as 2.9% to their lowest level since August 16, before trimming losses to trade 2.6% lower at Rs 4,387.50 per share by 10:07 a.m., while the NSE Nifty 50 remained flat. The day’s trading volume was 0.42 times the company’s 30-day average, with a relative strength index of 44.16.

According to Bloomberg data, out of 47 analysts covering TCS, 31 recommend a ‘buy’, nine suggest ‘hold’, and seven advise ‘sell’. The average 12-month price target from analysts indicates a potential upside of just 0.3%.