Why did Tata Communications falls 6% despite its net profit doubling in Q3?

Synopsis: Tata Communications fell sharply today as the company’s main profit drove because of an other income of Rs 259 crore and not from core business operations, which didn’t grow much during the quarter, leading the stock to fall sharply.

The shares of this leading Tata group stock, engaged in providing a wide range of communication, collaboration, cloud, mobility, connected solutions, network, and data centre services, are in focus after the profit almost doubled in Q3. In this article, we will dive more into the details of it.

With a market capitalisation of Rs 47,012 crore, the shares of Tata Communications Ltd are currently trading at Rs 1,612.60 per share, down 6 percent from its previous day’s closing price of Rs 1,714.15 per share. Over the past five years, the stock has delivered a muted return of 61 percent underperforming NIFTY 50’s return of 75 percent.

Q3 Highlights

The revenue from operations for Tata Communications stands at Rs 6,189 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 5,798 crores, up by 7 per cent YoY. Additionally, on a QoQ basis, it reported a slight growth of 1.5 percent from Rs 6,100 crore. 

Coming to its sales mix, the company derived Rs 5,380 crore from Data services, followed by Rs 373 crore from Voice Solutions, Rs 223 crore from Transformation Services, Rs 217 crore from Campaign Registry and Rs 52 crore from its Real Estate segment.

Coming down to its profitability, the company’s net profit stood at Rs 364.23 crore in Q3 FY26, up from Rs 236.08 crore in Q3 FY25, which is a growth of 54 percent YoY. Additionally, on a QoQ basis, it reported a staggering growth of 99 percent from Rs 183.21 crore. 

However, it is to be noted that the big jump in Tata Communications’ profit this quarter is largely because of “other income”, not just core operations. In the previous quarter, the company had reported a other loss of Rs 17.24 crore, but in the latest quarter it surged to Rs 259.29 crore other income, adding to a massive swing in the bottom line.

A major reason behind this was investment-related gains. In Q2, Tata Communications had already booked a gain of Rs 163.16 crore (net of tax) due to an increase in the market value (fair value) of its indirect listed investments held through a fund. 

Then in Q3, the company sold these investments, leading to an additional gain of Rs 128.66 crore (net of tax). Since this realised gain could be adjusted against past accumulated losses, the company also recorded a deferred tax asset of Rs 72.41 crore in the profit and loss statement, which further supported earnings.

Tata Communications is a global telecommunications and digital infrastructure company; it is a provider of voice, data, cloud communications, cybersecurity, the Internet of Things (IoT), and network services. The company also provides management services for banks, such as ATM deployment and POS solutions. 

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