Tata Consultancy Services (TCS) on Monday reported a 14 per cent year-on-year drop in consolidated net profit for Q3FY26 to ₹10,657 crore from ₹12,380 crore in Q3FY25, missing Street estimates, as large exceptional charges linked to restructuring, labour law changes and a US legal provision weighed on earnings for the quarter.
Profit before exceptional items and taxes in Q3FY26 stood at ₹17,469 crore, up 4.81 per cent over ₹16,666 crore in Q3FY25.
Revenue from operations came in at ₹67,087 crore, an increase of 4.86 per cent from ₹63,973 crore in the corresponding quarter of the previous year, in line with expectations. In dollar terms, revenue was $7,509 million compared with $7,539 million in Q3FY25, slipping 0.39 per cent.
On a constant currency basis, five of seven geographies expanded during the quarter, led by West Asia and Africa with an 8.3 per cent rise. North America, which contributes nearly half of TCS’s total revenue, clocked 1.3 per cent growth and a sequential uptick of 0.1 per cent in constant currency terms.
Exceptional expenses
Earnings were marred by sizeable exceptional expenses. First, the company booked restructuring costs of ₹235 crore linked to workforce rationalisation announced in July 2025. TCS said certain associates were released or will be released where deployment was not feasible, with termination benefits provided in line with policy.
Headcount declined to 5,82,163 compared with 5,93,314 in Q2FY26 and 6,07,354 in Q3FY25, with voluntary attrition at 13.5 per cent.
Second, the company recognised a statutory charge of ₹2,128 crore arising from the implementation of India’s new labour codes. The incremental impact comprised ₹1,816 crore towards gratuity and ₹312 crore for long-term compensated absences, primarily due to a change in wage definition. TCS said it is monitoring finalisation of central and state rules and would provide appropriate accounting effect on the basis of such developments as needed.
Third, TCS provided for a major US legal liability in a long-running case filed by Computer Sciences Corporation for which a provision of ₹1,010 crore was made. A further ₹342 crore was provided towards pre- and post-judgment interest. The company said it continues to pursue legal remedies and believes it has a strong case.
AI focus
TCS highlighted momentum in artificial-intelligence-led services. Annualised AI services revenue reached $1.8 billion, up 17.3 per cent sequentially on a constant currency basis.
“The growth momentum we witnessed in Q2FY26 continued in Q3FY26. We remain steadfast in our ambition to become the world’s largest AI-led technology services company, guided by a comprehensive five-pillar strategy,” said K. Krithivasan, MD and CEO, TCS.
“As of this quarter, there are over 217,000 associates with advanced AI skills, directly powering client success at scale. We doubled our intake of fresh graduates with higher-order skills, rapidly expanding our next-generation talent pool,” said Sudeep Kunnumal, chief HR
officer, TCS.
The board declared a dividend of ₹57 per share, including a special dividend of ₹46 per share.