HCL Technologies Q2 boosts outlook, shares jump 7%

HCL Technologies (

) reported a stronger-than-expected September quarter reaction from the Street, with the stock rising 7% after brokerages upgraded earnings estimates. The key number was the increase in the company’s revenue growth outlook, with overall FY27 guidance revised to 2.5-4% from 1-4% earlier. What stood out was the contrast within the business. Sequential constant-currency revenue grew 2.3%, driven by services growth of 3%, while the software segment declined 5.8% due to fewer licence renewals. Services also benefited from contributions from acquisitions, leading management to raise service revenue growth guidance to 3-4%. The headline upgrade looks positive, but investors should pay attention to what is driving it. Part of the improved outlook comes from inorganic growth, while the midpoint of organic growth guidance effectively softens after adjusting for acquisition-led contributions. That suggests demand remains healthy but not yet strong enough to remove concerns around discretionary spending and macro uncertainty. There were encouraging signals as well. Deal wins improved to $3.26 billion, up from $2.41 billion in the previous quarter, and Advanced AI revenue reached $219 million, contributing around 6% of total revenue and nearly half of incremental revenue. EBIT margin expanded 130 basis points to 18.2%, showing benefits from operating leverage and higher-margin AI offerings. The next trigger will be execution. Management expects pressure from wage hikes in the coming quarters, and the large $1.14 billion Mercedes-Benz deal is expected to contribute meaningfully only later. Investors should watch whether AI-led growth, large deal conversion and margin discipline can offset weakness in telecom and manufacturing accounts. View: HCL Technologies continues to execute better than many large-cap IT peers, but sustaining premium valuations will require stronger organic growth alongside AI-led revenue expansion.