Tata Communications' margin slips as tax rise cuts Q1 profit
Revenue grew 10.45% YoY, but expenses grew faster and the 40.69% tax rate drove a 31.78% profit decline.
Filed 22 Jul 2026, 13:20 IST · Tata Communications Ltd (TATACOMM)
Key takeaways
- Consolidated operating margin fell 0.99 percentage points QoQ to 7.45% as expenses grew 1.51% against revenue growth of 0.44%.
- Net profit fell 31.78% YoY as the tax rate rose 18.22 percentage points to 40.69%, despite revenue growth of 10.45%.
- The stock fell 3.16% on the results day, versus a 3.65% median absolute move after its last eight results.
Price around the results
Revenue growth stalled sequentially while operating profit fell
Tata Communications reported consolidated revenue growth of 10.45% YoY in Q1FY27, but sequential growth was only 0.44%. Operating profit rose 4.16% YoY but fell 11.26% QoQ, showing weaker conversion of revenue into operating earnings in the latest quarter.
Faster cost growth and higher depreciation squeezed margins
Expenses grew 10.99% YoY against revenue growth of 10.45%, narrowing operating margin by 0.45 percentage points; sequentially, the gap was wider as expenses rose 1.51% while revenue increased 0.44%. Depreciation rose 11.08% YoY and interest increased 5.31%, adding pressure below operating profit. Other income contributed 6.12% of pre-tax profit, so it was not a major earnings support, while the higher tax rate was a clear drag on reported profit.
Q1 margin was below the recent peak and sector peers
Operating margin fell from 8.44% in Q4FY26 to 7.45% in Q1FY27 and was also below 7.90% a year earlier. The company’s margin was 19.3 percentage points below the 26.75% median for four Telecommunication peers that had reported, placing it at the bottom of that comparison.
Initial market reaction was within the stock’s usual results range
The stock fell 3.16% on the results date, with volume at 4.05 times the reference level; it was down 1.00% on the following session. The initial decline was smaller than the 3.65% median absolute move across the eight most recent results, when the stock rose four times and fell four times.
Q1FY27 at a glance
Consolidated figures as filed with NSE — cross-checked against an independent source.
| Line item | Q1FY27 | Q4FY26 | QoQ | YoY |
|---|---|---|---|---|
| Revenue | ₹6,583 cr | ₹6,554 cr | +0.44% | +10.45% |
| Other income | ₹13 cr | ₹43 cr | -69.61% | -24.33% |
| Expenses | ₹6,092 cr | ₹6,001 cr | +1.51% | +10.99% |
| Operating profit | ₹491 cr | ₹553 cr | -11.26% | +4.16% |
| Operating margin (%) | 7.45% | 8.44% | — | — |
| Interest | ₹186 cr | ₹182 cr | +2.32% | +5.31% |
| Depreciation | ₹739 cr | ₹731 cr | +1.16% | +11.08% |
| Profit before tax | ₹211 cr | ₹434 cr | -51.31% | -27.42% |
| Tax | ₹86 cr | ₹183 cr | -53.07% | +31.45% |
| Net profit | ₹130 cr | ₹259 cr | -49.97% | -31.78% |
| EPS (₹) | ₹4.71 | ₹9.24 | -49.03% | -29.39% |
Operating margin of 7.45% compares with a Telecommunication sector median of 26.75% across 4 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | -3.16% | -2.36% |
| Next session | -1.00% | — |
Volume on the results session was 4.05× its 20-day average.
What to watch
- Whether operating margin recovers from 7.45% after the 0.99-percentage-point QoQ decline.
- Whether revenue growth exceeds the 1.51% QoQ increase in expenses.
- Whether the tax rate moves down from 40.69% after rising 18.22 percentage points YoY.