Why TCS is facing a $70M hit in Q1 FY27
What's the story
Tata Consultancy Services (TCS) will incur a one-time exceptional charge of $70 million in Q1 FY27. The decision comes after the US Supreme Court declined to hear its appeal in an ongoing trade secrets dispute. The company's total financial exposure in this case now stands at $220 million, including a previously set aside amount of $150 million for the litigation.
Case conclusion
Charge to be recognized in Q1 FY27
On June 15, the US Supreme Court upheld a lower court ruling that awarded damages to DXC Technology. This effectively puts an end to TCS's legal battle in this matter. The company has said it will recognize an additional $70 million charge for damages, interest accrued and legal costs as a one-time exceptional charge in Q1 FY27.
Financial impact
Total financial exposure in case now at $220M
The additional provision takes TCS's total financial exposure in the case to $220 million. This is a significant amount, considering that the company reported a net profit of ₹13,718 crore ($1.45 billion) in the fourth quarter. The dispute dates back to a 2019 lawsuit filed by Computer Sciences Corporation (now DXC Technology) against TCS for allegedly misusing confidential information obtained through employees hired from Transamerica.
Damages awarded
Jury found TCS guilty of willfully misappropriating trade secrets
In 2023, a jury found TCS guilty of willfully misappropriating trade secrets and recommended damages of $210 million. However, US District Judge Brantley Starr later reduced the award to $168 million, $56 million in compensatory damages and $112 million in punitive damages. The reduced award was upheld by the 5th US Circuit Court of Appeals in 2025.
Legal arguments
TCS's appeal to US Supreme Court
In its appeal to the US Supreme Court, TCS contended that DXC should not have been awarded unjust enrichment damages without proving actual losses. The company also argued that the punitive damages were excessive. However, DXC maintained that lower courts had correctly applied the law and that their ruling did not warrant further review by the highest court in America.