TCS vs Titagarh Rail Systems 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.

Titagarh Rail Systems reported a mixed Q3 FY26. Freight rail revenue declined to ~600 cr from 800 cr YoY due to wheel set supply disruptions, though normalization is underway. Passenger rail revenue surged from ~40 cr to ~160 cr YoY, with EBITDA jumping to ~22 cr, reflecting successful ramp-up. The company flagged off the first Ahmedabad Metro train and secured a wagon leasing license to boost private sector presence. Management guided for metro car production to reach 20 per month in coming months and expects passenger rail to dominate revenue in 2-3 years. The aluminium metro line and ABB TCMS technology transfer strengthen backward integration. Risks include continued wheel set volatility and potential delays in new wagon orders. Overall, the passenger business turnaround is encouraging, but freight headwinds persist.

Guidance read

Metro car production target of 20 cars per month: Management targets achieving a run rate of 20 metro cars per month within the next few months, up from current levels. Passenger rail EBITDA margin target of 15%: Ultimate target of 15% EBITDA margin for passenger rail, expected in 2-3 financial years, aided by backward integration. Aluminium metro line completion by Q2 FY27: The aluminium metro coach production line will be completed by Q2 FY27, enabling end-to-end manufacturing. Wagon leasing license to boost private market share: The newly obtained wagon leasing license will enable offering wagons on lease, expanding private sector presence.

Risk read

Key risks include Wheel set supply disruptions — Recurring wheel set shortages from the rail wheel factory have impacted freight production; normalization is uncertain.; FMA joint venture losses — The Italian subsidiary FMA has incurred losses; worst-case provisions are already booked, but cash impact remains.; Dependence on new wagon tenders — Current wagon orders cover only H1 FY27; any delay in new tenders could lead to underutilization of capacity.; Execution risk in metro ramp-up — Ramping metro production to 20 cars/month involves teething troubles; any delays could affect revenue visibility..

Promise ledger

Scorecard data is being built as historical quarters are processed.