HCLTech Q2 Review: Revenue, Margin Beat; GenAI Leads The Way — Yes Securities Upgrades Stock To 'Add'

Over the FY26 and 27, HCLTech should sustain above-industry growth aided by strong deal momentum and steady ramp-up of large contracts, but margins may face pressure from elevated restructuring costs (~40bps in FY26), high investment intensity, and wage actions (~75bops in Q3 FY26 and 40bps in Q4 FY26). While its AI-led IP and platform strategy is promising, near-term earnings leverage could stay muted due to cannibalization of revenue and margin pressure due to investment intensity. Given limited scope for valuation re-rating post guidance upgrade, returns are likely to be moderate and primarily earnings-led.

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Yes Securities Report

HCLTech Ltd. reported its Q2 FY26 results beating consensus on both revenue (1.5% beat) and Ebit margin (40 bps) despite having ~55bps margin headwinds from restructuring.

Growth was led by BFSI and technology and services verticals as large deal continue to ramp up and demand environment remains same. It also lifted its services revenue growth guidance from 3-5% in CC YoY to 4-5% based on strong H1.

However, overall guidance remains same due to weak software division.

HCLTech saw 116bps QoQ improvement in margins led by 35bps from improved profitability in software business, 50bps from improved utilization led by project Ascent, 50bps from INR depreciation and a headwind of 55bps from ongoing restructuring.

Management kept the guidance of 17-18% margins intact for FY26 including >40bps impact from ongoing restructuring. HCLTech is keen on keeping its investment intensity high in FY27 as it focuses on IP creation, better training and improved subscription revenue driven by GenAI.

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