Q3 earnings: Major IT cos take cumulative hit of Rs 5,400 cr from new labour code implementation

New Delhi, Jan 19 (PTI) India's top six IT companies - TCS, Infosys, HCLTech, Wipro, Tech Mahindra, and LTIMindtree - took a combined hit of about Rs 5,400 crore on account of the implementation of new labour codes, the one-time charge eroding their Q3 FY26 earnings performance substantially.

The new regulations, which consolidate 29 existing labour laws, have forced a structural shift in how companies calculate employee benefits.

The country’s largest IT services exporter, Tata Consultancy Services (TCS), bore the heaviest burden, reporting a "statutory impact" of Rs 2,128 crore. The provisioning led to a 13.9 per cent drop in net profit to Rs 10,657 crore.

TCS CFO Samir Seksaria noted that the hit included Rs 1,800 crore for gratuity and Rs 300 crore for leave encashment, warning that the codes will continue to shave 0.10–0.15 per cent off margins moving forward.

Infosys too reported a one-time exceptional charge of Rs 1,289 crore. The Bengaluru-based firm saw its net profit decline 2.2 per cent to Rs 6,654 crore. CEO Salil Parekh said the codes would result in an ongoing annual impact of roughly 15 basis points on margins.

The impact of the labour code was visible across most frontrunners' earnings, and will reflect in upcoming results too, as more companies are slated to announce their Q3 numbers.

HCLTech reported a one-time provision of Rs 956 crore, which dragged its net profit 11.2 per cent lower to Rs 4,076 crore. Without this hit, the company stated its profit would have actually grown.

Wipro saw a 7 per cent decline in net profit to Rs 3,119 crore, weighed down by a Rs 302.8 crore impact from the labour codes alongside restructuring charges.

While Tech Mahindra was the only major player to report a profit jump (14 per cent to Rs 1,122 crore) on margin expansion, it still set aside USD 30 million (about Rs 272 crore) for the new wage codes.

CFO Rohit Anand cautioned that the code would shave 0.20 per cent off margins quarterly.

LTIMindtree accounted for a Rs 590 crore one-time cost in its Q3 financial sheet due to the implementation of the new Labour Codes.

Despite the hit on profit-and-loss statements, the operational health of the IT sector remains resilient, with the top management of these companies pointing to a "robust" deal pipeline and a massive surge in AI-led demand.

Infosys saw its revenue from operations grow by 8.9 per cent to Rs 45,479 crore in the third quarter of FY26 from Rs 41,764 crore in the year-ago period.

The company has raised its revenue growth guidance for FY26 to 3-3.5 per cent in constant currency from 2-3 per cent earlier. During the December quarter, Infosys clocked a large deal TCV of USD 4.8 billion, with 57 per cent of it being net new.

Infosys' Parekh exuded confidence in the company's run to become an AI frontrunner and said that a strong momentum is being observed in AI adoption across Infosys' client base.

He foresees a good demand outlook in the current and next fiscal years and believes the company's large deals pipeline remains healthy, particularly in financial services, energy resources, and utility services.

Wipro's revenue from operations increased 5.5 per cent to Rs 23,555.8 crore in Q3 FY26 from Rs 22,318.8 crore in Q3 FY25. The company’s management described the current pipeline as "very strong", driven by vendor consolidation and AI-led modernisation.

Wipro CEO and MD Srini Pallia said the company is positioning itself for an AI-first world as artificial intelligence becomes a standing board-level mandate for global organisations.

Tech Mahindra bagged new deals of USD 1.096 billion during the quarter, and CEO Mohit Joshi asserted that the deal pipeline is "robust" and the strength in the business is very strong across geographies and verticals.

TCS saw its revenue from operations in Q3 increase 4.86 per cent to Rs 67,087 crore, as CEO K Krithivasan told analysts that AI and associated data revenues led the topline growth.

TCS COO Aarthi Subramanian said AI revenues have grown 17 per cent quarter-on-quarter to an annualised level of USD 1.8 billion, and it sees strong growth continuing in the segment.

HCLTech's revenue from operations grew 13.3 per cent to Rs 33,872 crore, bolstered by a 19.9 per cent sequential surge in Advanced AI revenue at USD 146 million, alongside a 10.8 per cent year-on-year increase in its Engineering and R&D services.

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

"The performance is underpinned by our AI vision and offerings...we seek continued momentum in AI-powered solutions like physical AI, which is robotics, AI factory, custom silicon engineering for edge inferencing chips, as well as large-scale transformation programmes in application development and modernisation services," HCLTech CEO C Vijayakumar said.

The quarter showed a divergent trend in hiring. While TCS saw a significant headcount dip of over 11,151, Infosys and Wipro added 5,043 and 6,529 employees, respectively.

HCLTech, meanwhile, signalled a shift in strategy by focusing on "elite engineers"-- hiring top technical talent at 3-4 times the standard entry-level salary to fuel its AI ambitions. PTI ANK MBI ANK BAL BAL