NewsEarningsTCS Q3 Results: IT Giant Reports ₹2,128 Crore Statutory Impact from New Labour CodesTCS Q3 Results: IT Giant Reports ₹2,128 Crore Statutory Impact from New Labour Codes
Tata Consultancy Services reported Q3 FY26 results showing a 14% YoY decline in net profit to ₹10,657 crore, primarily impacted by ₹2,128 crore in exceptional items from new Indian labour codes. Additional exceptional costs included ₹1,010 crore from a US legal claim and ₹253 crore in restructuring expenses, though the latter decreased 77% from the previous quarter. The company highlighted progress in AI transformation with over 217,000 associates now having advanced AI skills.
*this image is generated using AI for illustrative purposes only.
Tata Consultancy Services reported significant exceptional items impacting its Q3 FY26 financial performance, with the IT major disclosing ₹2,128 crore as statutory impact from India's new labour codes. The company announced these results on January 12, revealing a 14% year-on-year decline in consolidated net profit to ₹10,657 crore for the October-December quarter.
Impact of New Labour Codes
The substantial ₹2,128 crore exceptional item stems from India's new labour codes that came into effect on November 21. TCS assessed and disclosed the incremental impact based on legal opinions and available information.
| Component: | Amount |
|---|---|
| Gratuity Impact: | ₹1,816 crore |
| Long-term Compensated Absences: | ₹312 crore |
| Total Statutory Impact: | ₹2,128 crore |
The incremental costs primarily arise due to changes in wage definition under the consolidated labour codes, which include the Code on Wages 2019, Industrial Relations Code 2020, Code on Social Security 2020, and Occupational Safety, Health and Working Conditions Code 2020.
Additional Exceptional Items
Beyond the labour code impact, TCS reported ₹1,010 crore as exceptional items arising from Computer Sciences Corporation's legal claim in the US, alleging misappropriation of trade secrets and confidential information. The company expressed confidence in its legal position, stating it believes it has a strong case and will defend vigorously while pursuing legal remedies to overturn the Fifth Circuit's decision.
Restructuring Costs Decline
TCS reported ₹253 crore as exceptional items related to its restructuring exercise, which involved mass layoffs announced last year. This represents a significant 77% reduction from the ₹1,135 crore restructuring cost reported in Q2 FY25.
| Quarter: | Restructuring Cost | Change |
|---|---|---|
| Q3 FY26: | ₹253 crore | -77% |
| Q2 FY25: | ₹1,135 crore | - |
AI Transformation Progress
Despite the financial challenges, TCS highlighted its transformation into an AI-first enterprise. The company now has over 217,000 associates equipped with advanced AI skills, directly supporting client success at scale. TCS Chief HR Officer Sudeep Kunnumal noted the company doubled its intake of fresh graduates with higher-order skills, rapidly expanding its next-generation talent pool.
The executive emphasized that associates remain central to the company's AI transformation strategy, with their commitment to mastering next-generation capabilities providing confidence for responsible innovation and sustainable value delivery as artificial intelligence reshapes the services landscape.
Historical Stock Returns for Tata Consultancy Services
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| +0.99% | -0.34% | +0.98% | -4.26% | -19.79% | +1.99% |
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