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Tata Consultancy Services (TCS) has kicked off the Q3 earnings season today. The company has reported a 13.91% decline in consolidated net profit compared to the same quarter last year. On a sequential (QoQ) basis, profit also saw a slide of approximately 11.7%.
Key financial highlights
| Metric | Q3 FY26 (Current) | Q3 FY25 (YoY) | Change (%) |
| Consolidated Net Profit | Rs 10,657 Crore | Rs 12,380 Crore | -13.91% |
| Revenue from Operations | Rs 67,087 Crore | Rs 63,973 Crore | +4.86% |
| Operating Margin | 25.2% | 24.5% | +70 bps |
Possible causes of profit decline
The October-December quarter is traditionally weaker for thr IT sector due to fewer working days and year-end holidays in key market like US and Europe.
Cautious client spending also adds into it as while long-term digital transformation remains a priority, analysts noted continued caution in discretionary technology spending amid global macroeconomic uncertainties.
TCS has also significantly ramped up its internal investments, doubling its intake of fresh graduates with high-order skills and training over 217,000 associates in advanced AI.
The AI-first strategy
A major silver lining in the report was the performance of the AI business. TCS’s annualised AI services revenue reached USD 1.8 billion, growing at a rapid 17.3% QoQ in constant currency. CEO K Krithivasan emphasized that the company is on a steadfast path to becoming the world's largest AI-led technology services firm.
Market outlook
One of the significant moves announced was to reward shareholders, the Board of Directors declared a total payout of Rs 57 per equity share.
Interim Dividend: Rs 11 per share.
Special Dividend: Rs 46 per share.
Ahead of the results, TCS shares traded slightly lower as it was anticipated to be a “muted” quarter. However, the strong operating margins, stable at 25.2% and the massive special dividend are expected to provide a cushion for the stock in the coming sessions. The total contract value (TCV) for the quarter stood at a robust USD 9.3 billion, indicating a healthy deal pipeline for the future.
"Our sustained margin performance and strong cash conversion this quarter reflect our disciplined execution and financial resilience. Executing our five-pillar AI strategy is central to delivering long-term value", said Samir Seksaria, CFO, TCS.