Shares of Tata Elxsi were under sharp pressure today, falling over 4% to Rs 5,550 in late morning trade on the BSE, after the company reported its Q3FY26 results.

The stock hit an intraday low of Rs 5,531.35 and remains about 18% below its 52-week high of Rs 6,733.50, even as it trades nearly 21% above its 52-week low of Rs 4,601.05. The decline came amid high volumes, reflecting investor disappointment despite sequential revenue growth and margin improvement.

On the operating front, Tata Elxsi delivered a better-than-expected performance in constant currency terms, with revenue rising 3.2% QoQ, ahead of estimates, while EBITDA margin improved to 23.3% from 21.05% in the previous quarter, supported by higher utilisation and cost optimisation initiatives. Revenue for Q3FY26 stood at Rs 953.5 crore, up 3.9% QoQ and 1.5% YoY, with transportation emerging as the key growth driver, rising 7.7% sequentially. However, weakness persisted in media & communications and healthcare, with management flagging slower decision-making cycles, even as it expects healthcare to recover from Q4FY26 onwards and automotive to lead growth in FY27.

The stock reaction was driven largely by the sharp headline profit decline, with reported PAT falling 29% QoQ and 44% YoY due to an exceptional charge of Rs 95.8 crore linked to the new labour code. While adjusted profitability showed sequential improvement, the exceptional impact, coupled with muted YoY growth and continued softness in discretionary spends, triggered a valuation reset in a stock that still trades at a premium to both large-cap IT and ER&D peers.

With the market now demanding clearer visibility on sustained growth acceleration and margin normalisation, Tata Elxsi’s near-term performance is expected to be closely linked to execution in the automotive pipeline and recovery in lagging verticals.