TCS vs Techm Q3 FY26

TC

TCS

Q3 FY26 · Information Technology

TCS delivered a solid Q3 FY26 with revenue of INR 67,087 crore, up 4.9% YoY and 0.8% CC QoQ, driven by broad-based growth across verticals like BFSI, CBG, and ERU. Operating margin held steady at 25.2% despite wage hike headwinds, supported by productivity gains and currency benefits. AI services revenue surged to $1.8 billion annualized, growing 17.3% QoQ, reflecting accelerating enterprise AI adoption. Deal TCV was robust at $9.3 billion, including a mega deal in North America BFSI. Management expressed confidence in a good CY26, citing improving demand and strong pipeline. Key risk: sustained weakness in North America and UK markets could temper growth if discretionary spending remains subdued.

Guidance read

International revenue growth aspiration for FY26: Management aims to deliver higher international revenue growth in FY26 compared to FY25, with optimism for Q4. Operating margin target of 26%-28% band: CFO stated efforts to inch closer to the traditional 26%-28% margin band, with 26% as near-term goal. AI services revenue growth trajectory: AI services revenue expected to continue growing at a strong rate, with $1.8B annualized in Q3. Data center revenue timeline: Revenue from AI data center build-out expected to start ~18 months after anchor customer announcement.

Risk read

Key risks include North America and UK market softness — North America revenue was flattish and UK faced ongoing challenges, which could temper growth if discretionary spending remains subdued.; Restructuring costs and headcount reductions — TCS released ~1,800 employees in Q3 and expects restructuring to continue into Q4, impacting margins and morale.; Legal and one-time expenses — Other expenses rose sharply due to legal fees, M&A costs, and CSR; CFO indicated 10-20 bps one-time impact, but ongoing legal costs may persist.; BSNL revenue uncertainty — Revenue from BSNL remains flat until formal PO is received; no clear timeline provided, creating uncertainty..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.

Tech Mahindra delivered a strong Q3 FY26 with revenue of INR 14,393 crore, up 8.3% YoY, and operating margin expanding 290 bps YoY to 13.1%. Growth was broad-based across comms, manufacturing, retail, and healthcare, with Europe leading geographically at 11.2% YoY. Deal bookings hit a five-year high at $1.096 billion, including a $500M+ European telco win. Management reiterated its FY27 target of growing above peer average and reaching 15% EBIT margin. Key risks include BFSI volatility from furloughs and productivity pass-through, and potential margin headwinds from wage hikes under the new labor code.

Guidance read

FY27 revenue growth above peer average: Management expects to grow higher than the peer average by the end of FY27, supported by strong deal pipeline and large client momentum. FY27 EBIT margin target of 15%: Company remains on track to achieve 15% EBIT margin by FY27, driven by continued operational improvements and gross margin expansion. Large deal ramp in H1 FY27: The $500M+ European telco deal will start ramping in the first half of FY27, contributing to revenue growth.

Risk read

Key risks include BFSI volatility from furloughs and productivity pass-through — BFSI revenue declined 0.8% YoY due to higher-than-normal furloughs and annual productivity gains in a large contract, which may persist.; Wage hike impact on margins — Wage hike timing and quantum are undecided due to new labor code implications; could pressure margins when implemented.; Seasonal normalization in European auto — Manufacturing growth was partly boosted by one-time deliveries in European auto, which will normalize next quarter, creating a headwind..

Promise ledger

Of 3 tracked promises, management 0 met, 1 close, 2 missed.