Reflecting the strong Q2 performance and positive outlook, HCLTech has raised its FY26E Services revenue growth guidance to 4-5% CC (up from 3-5%), while maintaining overall company revenue guidance at 3-5% CC. Ebit margin guidance remains at 17-18%, factoring in wage hikes and restructuring costs in H2.
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HCLTech Ltd. delivered revenue growth ahead of expectations at +2.4% QoQ CC, with margins in line with estimates. The revenue growth was driven by strong IT Services (+2.6% QoQ CC) and ER&D (+2.2% QoQ CC), while the Software segment was muted with +0.5% QoQ CC growth.
Deal bookings were robust at $2.6 billion (+42% QoQ / +16% YoY), despite no mega deals, supported by two large deals signed in Q2 that were deferred from Q1.
The pipeline remains strong, bolstered by advanced AI offerings. HCLTech advanced AI revenue crossed $100 million in Q2 accounting for 3% of total revenue.
Reflecting the strong Q2 performance and positive outlook, HCLTech has raised its FY26E Services revenue growth guidance to 4-5% CC (up from 3-5%), while maintaining overall company revenue guidance at 3-5% CC. Ebit margin guidance remains at 17-18%, factoring in wage hikes and restructuring costs in H2.
Despite near-term margin pressures, HCLTech remains optimistic, supported by strong deal momentum and strategic focus on advanced AI. We increase revenue estimate by ~1% but moderate our margin expansion trajectory, leading to an EPS cut of ~2-3%.
We maintain Buy with a target price of Rs 1,700, based on 21x Sep-27E EPS.
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Also Read: HCLTech Shares Upgraded To 'Add' By Dolat Capital Post Inline Q2 Results — Check Target Price
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