Tata Consultancy Services Limited Q3 FY26 Earnings Call Summary

Summary

Tata Consultancy Services Limited - Q3 FY2026 Earnings Call Summary Monday, January 12, 2026, 19:00 hrs IST

Event Participants

Executives 4 Aarthi Subramanian (Executive Director, President and COO), K Krithivasan (CEO and MD), Samir Seksaria (CFO), Sudeep Kunnumal (CHRO)

Analysts 6 Dhanshree (Choice Institution Equities), Keith Bachman (BMO), Kumar Rakesh (BNP Paribas), Nitin Padmanabhan (Investec), Ravi Menon (Macquarie), Sudheer Guntupalli (Kotak Mahindra AMC), Vibhor Singhal (Nuvama)

Financials & KPIs

Geographic & Segment Commentary

• BFSI: Revenue impacted by typical Q3 seasonality and furloughs, yet TCV reached US$3.8 billion (up US$600M YoY). Growth is driven by modernization, AI-powered underwriting, and cloud-based migrations in retail and corporate banking.
• Consumer Business Group (CBG): Strong sequential growth led by Retail and Travel/Hospitality. While domestic markets remain subdued, international travel and AI-powered personalization in retail are driving resilience.
• Regional/Growth Markets: India and MEA continue to deliver standout performance, particularly in Public Services. Revenue growth is led by the enterprise segment in India and public sector digital infrastructure investment.

Company-Specific & Strategic Commentary

• AI Five-Pillar Strategy: Management is investing across the full stack from “Infrastructure to Intelligence.” This includes a US$1 billion equity partnership with TPG for GW-scale AI data center builds and the launch of AI-First hiring/onboarding solutions.
• Workforce AI Readiness: 217,000+ employees are now trained in higher-order AI skills (3x increase YoY). TCS is realigning its role framework with AI as the centerpiece, introducing roles like “rapid-build engineers.”
• M&A and Partnerships: Pending regulatory approval for the acquisition of Coastal Cloud to strengthen Salesforce and AI consulting. TCS is now ranked among the top 5 global Salesforce consultants.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Demand Environment & CY26

• Question: What is driving the confidence for a good CY26 despite softness in North America? (Sudheer Guntupalli)
• Answer: Decision-making for short-cycle projects is faster based on ROI. The demand environment is improving compared to Q1, with “Rapid Build” AI projects driving growth across all segments (K. Krithivasan).

AI Revenue Composition

• Question: Is the $1.8B AI revenue from landscape preparation or specific use cases? (Ravi Menon)
• Answer: It includes AI programs across the industry value chain and the data efforts required to deliver them. It focuses on business transformation and modernization rather than minor engineering task automation (Aarthi Subramanian).

Wage Code & One-off Expenses

• Question: Can you clarify the ₹2,128 crore provision? (Vibhor Singhal)
• Answer: This relates to the new India labor code, covering past service costs for gratuity (₹1,800 crore) and leave liability (₹300 crore). The ongoing impact will be minimal at 10-15 bps (Samir Seksaria).

Workforce Restructuring

• Question: Are the restructuring costs over? (Nitin Padmanabhan)
• Answer: The release of 1,800 people occurred this quarter where re-deployment into future roles wasn’t successful. This exercise will likely continue into Q4 but is not driven by a specific target number (Sudeep Kunnumal).

Data Center Timeline

• Question: When will the TPG partnership impact revenue? (Dhanshree)
• Answer: TCS is currently securing an anchor customer. Once the build-out begins, it typically takes 18 months before revenue starts contributing (Samir Seksaria).

Key Takeaway

TCS delivered a resilient Q3 FY2026 performance with revenue of ₹67,087 crores, maintaining stable 25.2% operating margins despite seasonal headwinds and wage hikes. The quarter was highlighted by a significant surge in AI-led demand, with annualized AI revenue reaching US$1.8 billion, a 17.3% sequential growth. Management successfully navigated a ₹2,128 crore one-time impact from the new India Wage Code while returning substantial capital to shareholders via a ₹46 special dividend. Strategically, the firm is pivoting toward an “AI-First” enterprise model, evidenced by the US$1 billion TPG infrastructure partnership and the training of over 217,000 associates in advanced AI skills. While North America and BFSI showed seasonal flatness, the robust US$9.3 billion TCV and accelerating “Rapid Build” AI projects support management’s confidence in a strong CY2026. TCS remains focused on reaching its 26-28% margin band through disciplined execution and pyramid optimization as it scales its global AI leadership.