Tata Consultancy Earnings: Clients Ramp Up Interest in Gen AI While Scrutinizing Smaller Projects

Wide-moat Tata Consultancy reported first-quarter earnings largely consistent with our expectations. Despite macroeconomic headwinds leading to increased scrutiny in dealmaking, we see a robust sales pipeline (indicated by the quarter’s 1.4 book/bill). As customers turn to Tata for Generative AI integrations, we think Tata’s moat sources, which are partially based on broad domain knowledge, remain strong. We maintain our fair value estimate for Tata Consultancy at INR 2,960. With shares currently trading fairly at INR 3,260, we think shares are overvalued.