Tata Elxsi on Tuesday reported a 29.66% sequential decline in its net profit for the third quarter ended December 31, 2025. The company posted a net profit of ₹108.89 crore for Q3 FY26, down from ₹154.81 crore in the preceding quarter.

The dip in profitability was primarily due to a one-time exceptional charge related to the implementation of new national labour laws. Despite the bottom-line pressure, the company maintained steady top-line growth, with revenue from operations rising 3.9% quarter-on-quarter (QoQ) to ₹953.47 crore.

"Exceptional" impact of new labour codes

Tata Elxsi noted a one-time provision for employee benefits amounting to ₹95.69 crore triggered by the new labour codes which became effective on November 21, 2025. Under accounting norms, the company was required to recognise the entire past service cost immediately in its profit and loss statement.

Excluding this exceptional item, the company’s operational performance remained healthy. Profit before tax (PBT) before the exceptional item rose to ₹241.96 crore, up from ₹214.72 crore in the previous quarter.

Operational resilience & EBIT expansion

The company’s earnings before interest and tax (EBIT) rose 17.5% to ₹199.43 crore in Q3 FY26. EBIT margins expanded to 20.92%, up from 18.49% in the previous quarter, driven by operational efficiencies and a favourable project mix.

Manoj Raghavan, CEO and Managing Director, said that growth was spearheaded by the transportation business, specifically through accelerated ramp-ups in software-defined vehicle (SDV) deals won earlier in the year. He also mentioned a major win with an off-highway OEM in the US for a complex operator control system.

Shares of Tata Elxsi closed 1.75% higher at ₹5,793 ahead of the results announcement. However, the stock has fallen nearly 3% over the past year, compared to a rise of nearly 12% in the Nifty 50 index during the same period.