Rs 35 Dividend and share buyback ahead? CLSA bullish on TCS with THIS target price

TCS share price target: Shares of Tata Consultancy Services (TCS) are back in focus as expectations of a Rs 35 dividend in the March quarter and the possibility of a share buyback over the next few quarters improve investor sentiment.

Foreign brokerage CLSA has reiterated its ‘outperform’ rating on the stock. The brokerage has built in a Rs 35 dividend for the fourth quarter and highlighted that recent Budget changes around favourable tax treatment for buybacks could support capital return plans.

CLSA sees strong support from a 6 per cent free cash flow yield and has assigned a price target of Rs 2,686.65, implying around 29 per cent upside from current levels. The 12-month target of Rs 3,593 suggests a potential upside of about 34 per cent.

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AI partnership with ServiceNow gains traction

TCS has expanded its multi-year partnership with US-based ServiceNow to accelerate large-scale AI adoption across enterprises. The partnership will focus on building industry-specific AI solutions that can transform manual and fragmented processes into intelligent and autonomous workflows.

The collaboration will target key back-office functions such as human resources, finance, supply chain, procurement and employee services. ServiceNow reported 20.5 per cent year-on-year constant currency growth in FY25 and has guided for 19.5–20 per cent growth in FY26, backed by a strong order book. The platform has also partnered with foundation model companies such as Anthropic and OpenAI, which is expected to improve customer experience and AI capabilities.

Brokerages believe system integrators like TCS, with strong SaaS partnerships, stand to benefit from this growth in enterprise AI adoption.

Stock performance and shareholding

TCS shares ended at Rs 2,629 on Wednesday, up Rs 55.3 or 2.2 per cent. The stock closed in the green after several sessions of heavy selling. However, the broader trend remains under pressure. The stock is down 16.8 per cent in the past one month and 18.5 per cent on a year-to-date basis. Over the last 12 months, it has declined around 29 per cent. The 12-month high stands at Rs 3,674.9, while the low is Rs 2,671.

Promoter holding through Tata Sons and others stands at 72.3 per cent, while foreign institutional investors hold around 12.5 per cent stake.

TCS Q3 Results Highlights

Tata Consultancy Services Ltd reported its December quarter results after market hours on January 12, with numbers largely in line with Street expectations.

Net profit declined 12 per cent sequentially to Rs 10,657 crore, compared with Rs 12,075 crore in the September quarter.

The company said profitability was impacted by a one-time charge of Rs 2,130 crore due to new labour laws. It also made a provision of Rs 1,010 crore towards a legal claim during the quarter.

Revenue in rupee terms came in at Rs 67,087 crore, up 2 per cent quarter-on-quarter.

In constant currency terms, revenue grew 0.8 per cent sequentially, indicating a muted underlying growth environment.

EBIT margin stood at 25.2 per cent, unchanged from the September quarter.

Deal wins for the quarter were strong at $9.3 billion, offering visibility for the coming quarters amid a cautious demand.