Tata Consultancy Services (TCS), India’s leading IT services exporter, reported a 14% year-on-year (YoY) decline in consolidated net profit for the third quarter ended December 31, 2025 (Q3 FY26). While the company’s bottom line was hit by one-time charges, its revenue performance slightly beat analyst estimates, driven by continued momentum in Artificial Intelligence (AI) and the BFSI sector.
1. Financial Highlights: Profit vs. Revenue
Despite the drop in net profit, TCS maintained steady growth in its operational revenue, reflecting a resilient business model in a seasonally weak quarter.
| Metric | Q3 FY26 (Current) | Q3 FY25 (YoY) | Change (%) |
| Net Profit | ₹10,657 Crore | ₹12,380 Crore | -13.9% |
| Revenue | ₹67,087 Crore | ₹63,973 Crore | +4.9% |
| Operating Margin | 25.2% | 24.5% | +70 bps |
| Order Book (TCV) | $9.3 Billion | $10.2 Billion | -8.8% |
2. The “Exceptional” Culprits: Why Profit Fell
The significant decline in profit was not due to poor operational performance but rather a series of substantial one-time charges totaling over ₹3,000 crore.
- New Labour Codes (₹2,128 Crore): Following the notification of four new labour codes by the Government of India on November 21, 2025, TCS took a one-time statutory hit. This included higher provisions for gratuity (₹1,816 Cr) and long-term compensated absences.
- U.S. Legal Provision (₹1,010 Crore): The company made a provision for a long-running legal dispute with Computer Sciences Corporation (CSC) in the United States, including interest.
- Restructuring Costs (₹235 Crore): Charges related to a workforce rationalization exercise initiated in mid-2025.
Note: Excluding these one-time impacts, TCS’s adjusted net profit would have actually grown by 8.5% YoY to approximately ₹13,438 crore.
3. The AI Engine: Reaching $1.8 Billion
A major silver lining in the Q3 report was the rapid scaling of the company’s AI-led business.
- Annualized AI Revenue: TCS’s AI services now generate $1.8 billion annually, a sharp 17.3% increase quarter-on-quarter.
- Skilled Workforce: The company has now trained over 217,000 associates in advanced AI skills.
- Strategic Shift: Management highlighted that clients are shifting from annual tech budgeting to quarterly tech budgeting, focusing on short-cycle AI projects with immediate ROI.
4. Workforce and Dividends
TCS continued to optimize its headcount while rewarding its shareholders with a massive payout.
- Headcount Decline: Total headcount fell by 11,151 during the quarter to 582,163. This marks a continued trend of workforce rationalization despite an increase in the intake of fresh graduates with advanced “next-gen” skills.
- Mega Dividend: The board announced a total dividend of ₹57 per share, consisting of:
- Third Interim Dividend: ₹11 per share.
- Special Dividend: ₹46 per share.
- Record Date: January 17, 2026 | Payment Date: February 3, 2026.
Future Outlook: Reclaiming Momentum
CEO K. Krithivasan expressed confidence in the upcoming calendar year, noting “green shoots” in the BFSI sector and North America. While the total contract value (TCV) was slightly lower than the previous quarter, the company’s focus on Cloud, Data, and Cyber transformation is positioning it to capture the next wave of AI spending in 2026.
