HCL Technologies, TCS shares slip into the red after opening higher post Q3 FY26 earnings; what you must know

While Tata Consultancy Services (TCS) numbers were mostly in line with expectations, HCLTech's numbers were better across key parameters.

However, investor sentiment was dented as the numbers did not throw any positive surprises.

When last seen, TCS shares were trading 0.69% lower at ₹3,217.40 on the NSE, while HCL Technologies was down 1.22% at ₹1,647.30 on the NSE.

The NIFTY IT index was down 0.08% at 37,958.80 levels.

TCS Q3 FY26 earnings

TCS, India's largest IT services exporter, on Monday reported a 13.91% drop in December quarter profit at ₹10,657 crore, majorly due to a one-time impact of new labour codes.

Implementation of the new labour codes during the quarter resulted in a "statutory impact" of ₹2,128 crore, the company stated, adding that, excluding the one-time impact, its profit would have grown 8.5% to ₹13,438 crore.

The company, one of the largest private sector employers in the country, disclosed that the overall headcount was down by 11,151 in the October-December period to 5,82,163.

Chief Human Resources Officer Sudeep Kunnumal told analysts later that there were 1,800 exits on account of a restructuring exercise announced in August.

Overall revenue from operations during the quarter increased 4.86% to ₹67,087 crore from ₹63,973 crore, and Chief Executive and Managing Director K Krithivasan told analysts that artificial intelligence and the associated data revenues led the topline growth.

The company continues to work towards achieving the aim of higher international revenue growth in FY26 as compared with FY25, the CEO said, adding that client conversations and deal momentum make him believe that 2026 will be a "good year".

In her comments at the analyst meet, the company continued to skip the routine press conference for the second consecutive quarter.

TCS Chief Operating Officer Aarthi Subramanian said AI revenues have grown 17% quarter-on-quarter to an annualised level of $1.8 billion, and it sees strong growth continuing in the segment.

The operating profit margin was stable when compared with the September quarter at 25.2 per cent during the three-month period, but higher than the 24.5 per cent in the year-ago period, as per a company statement.

Chief Financial Officer Samir Seksaria said margins were positively impacted by productivity gains and currency movements, while the wage hike impact and brand building proved to be a headwind.

However, changes in the labour codes will continue to have a 0.10-0.15% impact on margins going ahead, Seksaria said.

During the quarter under review, it decided to set aside over ₹2,100 crore towards the labour code provisions, he said, adding that this included ₹1,800 crore on gratuity and ₹300 crore on leave encashments.

The company's overall new deal signings, captured through the total contract value number, stood at $9.3 billion for the December quarter.

HCLTech Q3 numbers

HCLTech reported an 11.2% decline in consolidated net profit to ₹4,076 crore in the October-December quarter of FY26, hit by a one-time provision of $82 million (₹719 crore) for the implementation of new labour codes.

The Noida-headquartered firm had registered a net profit (attributable to owners of the company) of ₹4,591 crore in the year-ago period.

Excluding the one-time labour code impact, the company noted that net profit would have stood higher at ₹4,795 crore.

According to regulatory filings, the impact of the new labour codes on earnings before interest and taxes (EBIT) was $109 million (₹956 crore).

HCLTech Chief People Officer Ram Sundararajan stated that the company has now factored all necessary provisions into the current quarter's pay changes and does not anticipate further substantial incremental costs related to the new rules.

HCLTech's revenue from operations grew 13.3% to ₹33,872 crore compared to ₹29,890 crore in Q3 FY25. This growth was bolstered by a 19.9% sequential surge in Advanced AI revenue at $146 million, alongside a 10.8% year-on-year increase in its engineering and R&D services.

On a quarter-on-quarter (QoQ) basis, its profit declined 3.7%, while revenue increased 6%.

HCLTech raised its revenue growth (CC) guidance to 4.0%-4.5% YoY and the services revenue growth (CC) guidance to 4.75%-5.25% YoY for FY26. The EBIT margin guidance remained unchanged at 17%-18%, excluding the ₹956 crore ($109 million) one-time impact of India’s New Labour Codes on EBIT.

The company clocked $3 billion in net new bookings this quarter, up 43.5% from the year-ago period.

It also secured a mega $473 million deal with a global apparel retailer to serve as its long-term AI-led technology partner.