TCS Q3 profit falls 14% despite revenue growth

Research Analyst: UJVIN NEVATIA (PROPRIETOR: NEVAT INVESTMENTS) | SEBI Registration No.: INH100009628 Tata Consultancy Services Limited

reported a 13.9% year-on-year decline in Q3 FY26 net profit to ₹10,657 crore. Revenue grew 4.9% to ₹67,087 crore. What happened? Profit was affected by ₹3,391 crore of exceptional expenses, including restructuring costs, provisions linked to new labour codes and a legal claim. Despite these charges, TCS maintained an operating margin of 25.2%. Its quarterly deal wins stood at $9.3 billion, while annualised AI services revenue reached $1.8 billion. Why does it matter? The decline in reported profit does not fully reflect the company's operating performance. Exceptional charges affected earnings even as revenue increased. However, the ability to sustain revenue growth and margins remains important as clients adjust their technology spending. My view This result demonstrates why investors should look beyond headline profit figures. Separating exceptional expenses from recurring operating costs gives a clearer picture of business performance. TCS's growing AI revenue is encouraging, but the important question is whether AI-related demand can generate sustained revenue growth without putting pressure on margins. What I am watching next I would track revenue growth in constant currency, operating margins, AI revenue and deal conversion. Any recurring impact from labour costs will also be important. No Recommendations Source: The Hindu / TCS Q3 FY26 results Disclosure: I, my entity, associates or relatives don't have any holding, position or other material interest in the company.