HCLTECH

Exceeds Expectations in Q2, Raises FY26 Revenue Guidance

reported better-than-estimated results for Q2FY26, with constant currency (CC) revenue growing 2.4% sequentially and EBIT margin expanding 110 basis points (bps) to 17.4%. → Revenue growth was led by the sequential improvement across all segments, specifically driven by IT and business services, followed by Engineering and R&D (ER&D) services. Margin expansion was attributed to the improved profitability of the software business, the absence of certain one-off expenses, benefits from Project Ascend, and a weak rupee. → The company raised its FY26 IT services CC revenue growth guidance to 4–5% (from 3–5%), while maintaining the overall revenue guidance at 3–5% CC. New deal total contract value (TCV) rose both year-on-year and sequentially to $2.6 billion, boosted by two large deals deferred from Q1, positioning the company well for H2FY26. → The EBIT margin guidance was maintained at 17–18% for FY26, but the margin is expected to be capped near the lower end due to an expected 70–80 bps impact from wage hikes in Q3, with a carry-over effect into Q4. → HCL disclosed its advanced Artificial Intelligence (AI) revenue for the first time at over $100 million in Q2, representing 3% of total annualized revenue. The company’s AI strategy is rooted in an asset-light framework focused on IP creation and service transformation, contrasting with competitors' potentially capex-heavy models. → Despite relatively better revenue growth, HCL's valuations are a "tad higher" than those of and , leaving no room for disappointment.