TCS net profit fell 14% to ₹10,657 cr in Q3, revenue growth beat estimates

Q3 performance revenue growth beats estimates

Tata Consultancy Services (TCS), India’s largest information technology (IT) services player, beat revenue growth estimates for the third quarter (October-December) of FY26, as growth momentum continued on the back of green shoots in banking, financial services and insurance (BFSI), North America, and AI-driven demand.

 

TCS reported a 13.9 per cent decline in its net profit at ₹10,657 crore for Q3FY26 from ₹12,380 crore in the year-ago quarter. Sequentially, profit declined 11.7 per cent. The company’s bottom line was impacted due to restructuring expenses, one-time charges arising from changes in labour codes, and a provision of ₹1,010 crore for a legal claim.

 

Revenue grew 4.9 per cent in reported terms to ₹67,087 crore in Q3FY26. On a sequential basis, revenue increased 2 per cent.

 

TCS’s revenue performance beat Bloomberg estimates, while profit missed expectations. 

 

According to Bloomberg consensus, revenue was estimated at ₹66,849 crore and net profit at ₹13,005 crore.

 

Overall, TCS recorded exceptional expenses of Rs 3,391 crore in Q3 FY26, versus Rs 1,135 in the Sept' 2025 quarter, and nil in the year-ago period. 

 

The total contract value (TCV) of deals signed during the quarter stood at $9.3 billion, compared with $10 billion in Q2 and $9.4 billion in Q1.

 

K Krithivasan, managing director and chief executive officer, said the growth momentum seen in Q2FY26 continued into the third quarter. “Based on client conversations, strong deal momentum and the leadership we are gaining in artificial intelligence (AI), we are confident of a good calendar year 2026,” he said.

 

TCS said its annualised AI services revenue grew 17.3 per cent sequentially to $1.8 billion. Krithivasan also highlighted that the company is making good progress with potential clients for its recently announced data centre business, HyperVault.

 

Growth, the CEO said, was being driven by AI and data. “We talked about a number of rapid-build projects that we are doing in the AI segment. Essentially, these are short-cycle projects, where decision making is faster based on return of investment. We see a steady increase, which is visible in our AI revenue,” he added.

 

Despite positive growth across most geographies, revenue from international markets rose just 0.5 per cent quarter-on-quarter (Q-o-Q) on a constant-currency basis. According to an initial note from Equirus Securities, “Overall results are marginally lower than our expectations, both on Q-o-Q constant-currency dollar sales growth and earnings-before-interest-and-taxes margins. TCS again reported sluggish international market growth of 0.5 per cent Q-o-Q in Q3. As a result, the company’s required growth rate in Q4 to achieve higher constant-currency growth for FY26 versus the 0.9 per cent reported in FY25 now appears challenging,”

 

Excluding pass-through sales, Equirus said, core business constant-currency growth was estimated at 0.3 per cent Q-o-Q.”

 

Among major markets, North America grew 0.1 per cent sequentially, while Latin America expanded 4.6 per cent. The UK declined 1.9 per cent, whereas Europe grew 2.1 per cent. India registered sequential growth of 8 per cent, though revenue from India declined 34.3 per cent year-on-year (Y-o-Y).

 

North America grew 1.3 per cent Y-o-Y, the UK declined 3.2 per cent, and continental Europe rose 1.4 per cent.

 

BFSI, TCS’s largest vertical, grew 1.6 per cent Y-o-Y, though it declined 0.4 per cent sequentially. The consumer business fell 2.7 per cent Y-o-Y but grew 1.3 per cent Q-o-Qr. Life sciences and health care rose 0.9 per cent sequentially and 2.2 per cent Y-o-Y.

 

Explaining the AI-related deals, Aarthi Subramanian, executive director — president and chief operating officer, said the $1.8 billion annualised revenue primarily comprises AI programmes across industry value chains, along with the data capabilities required to deliver them. “We are talking about two types of AI programmes — first, AI for business transformation across industry value chain and verticals, and second is when we use AI for modernisation.”

 

TCS reported an operating margin of 25.2 per cent for the quarter.

 

Samir Seksaria, chief financial officer of TCS, said sustained margin performance and strong cash conversion reflected disciplined execution and financial resilience. He pointed out that the ongoing impact of the new labour codes would be 10 to 15 basis points.

 

The company’s headcount continued to decline during the quarter. As of Q3FY26, TCS had 582,163 employees, a reduction of 11,151 from the 593,314 reported in Q2FY26.

 

Sudeep Kunnumal, chief human resources officer, said associates remained central to TCS’ transformation into an AI-first enterprise. As of this quarter, more than 217,000 associates possess 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 give us the confidence to innovate responsibly and deliver sustainable value as AI reshapes the services landscape.”