Due to the labor code rejig, TCS's Q3 net profit dropped 14% to Rs 10,657 crore

TCS Q3 Net Profit Falls 14% on One-Time Labour Code Costs; AI Revenue Hits $1.8 Billion

Tata Consultancy Services (TCS) reported a 14% year-on-year decline in net profit to Rs 10,657 crore for the quarter ended December 2025, weighed down by one-time exceptional charges related to severance payouts and the implementation of India’s new labour codes.

Profit also fell nearly 12% sequentially, while revenue rose 5% year-on-year and 2% quarter-on-quarter to Rs 67,087 crore. On a constant currency basis, revenue was largely flat, increasing 0.8% sequentially, reflecting continued demand softness in what is typically a seasonally weak quarter due to higher holidays.

India’s largest software services exporter is seeking to regain growth momentum through aggressive acquisitions, tighter employee policy measures, and its first large-scale layoffs, which have resulted in the company shedding about 2% of its workforce of over 600,000 employees.

Commenting on demand trends, K Krithivasan, chief executive officer and managing director, said the outlook has been improving. “The overall demand environment improved in the second quarter compared to the first quarter, and that trend continued in the third quarter,” he said.

TCS’s AI services business generated $1.8 billion in annualised revenue, up 17.3% quarter-on-quarter, Krithivasan added. This marks an increase from the $1.5 billion AI revenue figure the company disclosed during its analyst day last month.
Chief operating officer Aarthi Subramanian said clients continue to invest in cloud, data, cybersecurity and enterprise transformation initiatives to build readiness for AI adoption.

While revenue exceeded analyst expectations, profit fell short. An ET poll of analysts had projected 1% sequential growth in net profit and 1.4% revenue growth for the quarter.

On Monday, TCS’s board approved the third interim dividend of Rs 11 per equity share for the fiscal year, along with a special dividend of Rs 46 per share, both payable on February 3, 2026.