Inside India’s Ten-Minute Reckoning: TCS & HCLTech CEOs on Q3 and Beyond
The Indian IT sector is navigating a complex landscape as evidenced by the recently released Q3 FY26 results from Tata Consultancy Services (TCS) and HCLTech. While both companies demonstrate resilience, their financial outcomes reveal the nuanced challenges and opportunities that define the current environment.
TCS, a bellwether of the Indian IT industry, reported a consolidated revenue of ₹67,087 crore, marking a 4.87% year-on-year increase. However, the company's consolidated net profit experienced a 13.92% decline, settling at ₹10,657 crore. This dip in profit was attributed to one-off charges, including provisions for new labor codes and a legal claim, totaling ₹3,391 crore. Despite the profit decline, TCS announced an interim dividend of ₹11 per share and a special dividend of ₹46 per share. CEO K Krithivasan acknowledged the mixed performance, highlighting steady revenue growth and deal wins amidst cost pressures. He emphasized the company's ambition to become the world's largest AI-led technology services company, underpinned by a five-pillar strategy. TCS's AI services saw healthy growth, with annualized AI services revenue reaching $1.8 billion, a 17.3% sequential increase.
HCLTech presented a contrasting picture, with revenue from operations rising 13.3% year-on-year to ₹33,872 crore. However, the company also reported an 11.2% year-on-year decline in consolidated net profit to ₹4,076 crore for the same period. Similar to TCS, HCLTech's profit was impacted by a one-time increase in provision for employee benefits due to new labor codes, estimated at ₹956 crore. CEO C Vijayakumar noted the company's achievement of crossing $15 billion in annualized revenues, driven by strong revenue momentum and exceptionally high new bookings of $3 billion. HCLTech's advanced artificial intelligence revenue also saw substantial growth, rising nearly 20% quarter-on-quarter to $146 million.
Several factors are shaping the current trajectory of the Indian IT sector. A Centrum report suggests that while select verticals like BFSI show traction, overall revenue growth is expected to be modest. The report anticipates Tier 2 players to outperform Tier 1 companies, with revenue growth for the latter ranging between +0.2% and +1.7% quarter-on-quarter in US dollar terms. Rupee depreciation against the US dollar is expected to support INR-based revenue growth, although cross-currency headwinds may partially offset these gains.
Both TCS and HCLTech are actively focusing on AI and digital transformation to drive future growth. TCS announced a strategic partnership with TPG to support the growth of its AI data center business, HyperVault. HCLTech secured a mega, five-year strategic engagement with a leading global apparel retailer to serve as its long-term AI-led technology partner.
Looking ahead, the Indian IT sector is expected to navigate a complex interplay of factors, including global economic uncertainty, evolving client spending patterns, and the increasing importance of AI and digital transformation. While near-term growth may remain muted, the sector's long-term prospects are underpinned by its ability to adapt to changing market dynamics and capitalize on new opportunities.
