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TCS Q3 Profit Drops 14% Amid Labour Code & Legal Provisions

Tata Consultancy Services reported a 13.9% year-on-year decline in consolidated net profit for Q3 FY25, amounting to Rs 10,720 crore. The drop was attributed to significant one-time provisions, including Rs 2,128 crore for the impact of new labour codes and Rs 1,010 crore for a legal claim. Despite the profit pressure, the company's revenue grew nearly 5% annually to Rs 67,087 crore. CEO K Krithivasan highlighted the company's continued growth momentum and ambition in AI, which now generates $1.8 billion in annualised revenue.

Key Points: TCS Q3 Net Profit Falls 14% Year-on-Year

  • 13.9% annual profit fall
  • Revenue grew nearly 5%
  • $1.8B AI annualised revenue
  • Provisions for new labour codes
  • Legal claim provision of Rs 1,010 crore
2 min read

TCS Q3 net profit falls 14 pc annually, declines over 11.5 pc sequentially

TCS Q3 profit declines 14% annually to Rs 10,720 crore, impacted by labour code provisions and a legal claim, despite revenue growth.

"We remain steadfast in our ambition to become the world's largest AI-led technology services company. - K Krithivasan"

Mumbai, Jan 12

India's largest IT services company, Tata Consultancy Services, on Monday reported a 13.9 per cent year-on-year fall in its consolidated profit for the third quarter of the current financial year.

The IT firm's consolidated net profit declined to Rs 10,720 crore, compared to Rs 12,444 crore in the same quarter last financial year (Q3 FY25), according to an exchange filing.

On a quarter-on-quarter basis, profit dropped 11.6 per cent from Rs 12,131 crore in the September quarter of FY26.

"The growth momentum we witnessed in Q2 FY26 continued in Q3 FY26. We remain steadfast in our ambition to become the world's largest AI-led technology services company, guided by a comprehensive five-pillar strategy," K Krithivasan, Chief Executive Officer and Managing Director, said.

"Our AI services now generate $1.8 billion in annualised revenue, reflecting the significant value we provide to clients through targeted investments across the entire AI stack, from Infrastructure to Intelligence," Krithivasan added.

Despite the profit decline, TCS recorded a nearly 5 per cent rise in revenue, which increased to Rs 67,087 crore from Rs 63,973 crore a year ago.

Sequentially, revenue grew by about 2 per cent. In constant currency terms, revenue growth stood at 0.8 per cent.

The company said its profit was impacted mainly due to exceptional items booked during the quarter.

These included provisions related to the new labour codes, legal claims, and restructuring expenses.

TCS provided Rs 2,128 crore towards the statutory impact of the new labour codes. This included Rs 1,816 crore for gratuity and Rs 312 crore for long-term compensated absences.

The company said these provisions arose mainly due to changes in the wage definition under the new labour rules.

In addition, TCS set aside Rs 1,010 crore for a legal claim filed by Computer Sciences Corporation (CSC) in 2019.

The case, filed in a US court in Texas, alleges that TCS misappropriated trade secrets and confidential information belonging to CSC.

Because of these one-time charges, TCS's bottom line came under pressure during the quarter, even as its business continued to show stable revenue growth.

- IANS

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Reader Comments

S
Sarah B
$1.8 billion from AI services annually is impressive! 💡 While profits are down this quarter, the strategic shift towards AI seems to be paying off. The US legal case is a concern though – hope it gets resolved without further financial impact.
A
Arjun K
As a shareholder, I'm a bit worried. A 14% annual drop in profit is significant, no matter how you spin it. The labour code provision was expected, but the Rs 1,010 crore legal provision is a fresh negative. Management needs to be more transparent about these legal risks.
P
Priya S
The positive is that they are setting aside money for employee benefits under the new codes. Many companies try to avoid these costs. At least TCS is being responsible. The core business (revenue up 5%) seems stable. This might be a temporary blip.
K
Karthik V
Constant currency growth of only 0.8% is the real story here. The global demand environment for IT services is still soft. TCS is a bellwether for the sector – if they are struggling to grow, the entire industry might face headwinds. The AI push is necessary for survival.
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Michael C
Respectfully, the CEO's statement about being "steadfast in our ambition" feels a bit disconnected when profits are down so sharply. Maybe focus on navigating the current challenges before talking about becoming the world's largest? The fundamentals need shoring up first.

We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.

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