TCS Q3 Profit Falls 12% Amid Costs, Declares ₹57 Dividend
Overview
Tata Consultancy Services (TCS) reported a 12% sequential decline in Q3 net profit to ₹10,657 crore, primarily due to a ₹2,130 crore one-time labor code expense and a ₹1,010 crore legal provision. Revenue saw a modest 2% growth to ₹67,087 crore, with EBIT margins holding steady at 25.2%. The company approved a substantial total dividend of ₹57 per share.
Stocks Mentioned
TCS Posts 12% Profit Drop on One-Time Costs, Revenue Edges Up
Tata Consultancy Services (TCS) on Monday reported a 12% sequential decline in net profit for the third quarter, with earnings falling to ₹10,657 crore from ₹12,075 crore in the prior period. The IT services giant cited a significant one-time impact of ₹2,130 crore due to new labor laws, alongside a ₹1,010 crore provision for a legal claim, which weighed on profitability.
Revenue in rupee terms grew 2% quarter-on-quarter to ₹67,087 crore. In constant currency, TCS's revenue saw a more modest 0.8% sequential increase. Analysts had projected revenues closer to ₹66,728 crore. Earnings Before Interest and Tax (EBIT) stood at ₹16,889 crore, a 2% rise from the previous quarter and slightly above consensus estimates.
Margins Stable, Deal Wins Strong
The company's EBIT margin remained steady at 25.2%, matching both the prior quarter's figure and market expectations. TCS secured $9.3 billion in new deals by the end of the quarter, indicating a healthy sales pipeline.
Substantial Dividend Approved
Shareholders are set to receive a significant payout. The board approved a third interim dividend of ₹11 per share, coupled with a special dividend of ₹46 per share, totaling ₹57 per share. The record date for this payout is January 16.
AI Services Drive Future Outlook
TCS highlighted its expanding Artificial Intelligence capabilities, reporting over 5,000 AI engagements executed. AI-related services are already generating over $1.5 billion in annualized revenue, representing nearly 5% of the company's total turnover. The management expressed confidence that new-age services will contribute approximately $11 billion in annualized revenue going forward, with AI services exhibiting robust sequential growth of 16.3% and year-on-year growth of 38.2% in constant currency.
