Labour Code impact, legal claim provision drag down TCS Q3 net profit by 14% to ₹10,720 crore
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Tata Consultancy Services Ltd (TCS) for the third quarter ended December 31, 2025, reported 14% drop in net profit to ₹10,720 crore from ₹12,444 crore a year ago due to impact of new labour codes amounting to ₹2,128 crore, provision towards legal claim of ₹1,010 crore and expenses of ₹253 crore towards termination of employees during the quarter.
In the quarter the company laid off 1,800 employees and the ‘release’ would continue in the current quarter as well, the company told analysts over a conference call. As on December 31, 2025 the global headcount was 5,82,163 and the attrition rate was 13.5% for 12 months, the company said.
During the quarter the company’s revenue grew 5% Year on Year (YoY) to ₹67,087 crore.
The board has declared a dividend of ₹57 including ₹46 per share as special dividend. The record date is January 17, 2026 and payment will me made on February 3, 2026.
Annualized AI services revenue at $1.8 billion; grew 17.3% Quarter on Quarter (QoQ) in Constant Currency. Operating Margin at 25.2% remained stable sequentially. Net Margin at 20.0% grew 40 bps QoQ.
The BFSI segment grew 1.6% YoY but it was impacted by seasonality. The Consumer Business de-grew 2.7%, Life Sciences & Healthcare and Energy, Resources & Utilities grew 2.2% each, Manufacturing and Technology Services up 1.7% each, Communication & Media down 1.6% and Regional markets & others grew by 19.4% YoY.
Region wise North America grew 1.3%, Latin America up 1.4%, UK de-grew by 3.2%, Continental Europe up 1.4%, Asia pacific grew 3.5%, India de-grew 34.3% and MEA grew by 3.8% YoY.
K. Krithivasan, chief executive officer and managing director, said “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.”
He said the momentum would continue in the rest part of the financial year and North American maarket would improve further.
“Our AI services now generate $1.8 billion in annualized revenue, reflecting the significant value we provide to clients through targeted investments across the entire AI stack, from Infrastructure to Intelligence,” he said.
Aarthi Subramanian, executive director, president and chief operating officer, said “We continued to see AI acceleration this quarter. We helped customers identify valuable AI opportunities and deployed solutions faster.”
“Our customers continue to invest in Cloud, Data, Cyber and Enterprise Transformations to build readiness for AI. We further strengthened our Salesforce capabilities with Coastal Cloud acquisition, building on our investment in ListEngage,” she said.
Samir Seksaria, Chief Financial Officer, said, “Our sustained margin performance and strong cash conversion this quarter, reflects our disciplined execution and financial resilience.”
“Backed by a robust balance sheet, we continue to invest confidently in strategic growth areas. Executing our five-pillar AI strategy at speed and scale is central to our transformation into an AI-first enterprise, and delivering long-term value for our stakeholders,” he said.
Sudeep Kunnumal, Chief HR Officer, said “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.”
“The passion and commitment our associates show in mastering next-gen capabilities gives us the confidence to innovate responsibly and deliver sustainable value as AI reshapes the services landscape,” he added.
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