HCL Technologies (HCLTech) shares surged as much as 4.54% to hit an intraday high of Rs 1,275.40 per share on Tuesday after the IT major reported better-than-expected results for the September quarter (Q2 FY27).
While profitability and operating margins beat Street estimates, brokerages remained divided on the company's growth trajectory, with Citi, Kotak Securities and JPMorgan retaining cautious ratings despite raising or maintaining their price targets.
At 9:27 am, HCLTech shares were trading 4.48% higher at Rs 1,274.70 per share. In comparison, the BSE Sensex was trading at 72,302 levels, up 0.53%.
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The company's quarterly performance was supported by higher revenue and operating profitability, while management's revised FY27 revenue guidance and commentary on demand, deal wins and margins remained key focus areas for investors.
HCLTech Q2 Results: Key Highlights
HCLTech reported consolidated net profit of Rs 5,132 crore for Q2 FY27, up 11% quarter-on-quarter (QoQ) from Rs 4,624 crore. The figure was ahead of the Street estimate of Rs 4,875 crore.
Revenue increased to Rs 35,620 crore from Rs 34,579 crore in the previous quarter, exceeding the estimate of Rs 35,547 crore.
At the operating level, earnings before interest and tax (EBIT) rose 10.9% QoQ to Rs 6,465 crore, compared with Rs 5,831 crore in Q1 FY27. This was higher than the estimate of Rs 6,243 crore.
EBIT margin expanded to 18.1% from 16.7% in the preceding quarter, an improvement of 140 basis points (bps). The margin also exceeded the Street estimate of 17.56%.
HCLTech Revises FY27 Revenue Growth Guidance
HCLTech raised the lower end of its constant-currency (CC) revenue growth guidance for FY27, while retaining its operating margin outlook.
The company's overall revenue growth guidance now stands at 2.5%-4%, compared with the earlier range of 1%-4%. For services revenue, the revised guidance is 3%-4%, against the previous range of 1.5%-4.5%.
The EBIT margin guidance remains unchanged at 17.5%-18.5%.
The revised ranges narrow the guidance bands, although the midpoint of the company's overall revenue growth guidance remains unchanged. Management's outlook for services growth and the sustainability of margins are likely to remain important variables for investors in the second half of FY27.
HCLTech Declares Rs 12 Interim Dividend
HCL Technologies announced a second interim dividend of Rs 12 per share.
The record date to determine shareholder eligibility has been set for October 16, 2026. The dividend is scheduled to be paid to eligible shareholders by October 26, 2026.
Employee Additions Improve; Attrition Edges Up
HCLTech reported a net increase of 6,450 employees in Q2 FY27, reversing the net reduction of 3,292 employees recorded in the June quarter.
The company's attrition rate, however, edged up to 12.8% from 12.7% in Q1 FY27.
HCLTech Q2 Earnings Call: Key Takeaways
Management said the company recorded its second-highest-ever quarterly new bookings and its strongest first-half performance on record.
The software business remained a weak spot, with revenue declining sequentially and weighing on overall growth. Management, however, noted that demand had been building over the preceding quarter, while also cautioning that the operating environment remained volatile.
HCLTech said EBIT margins came in ahead of its own expectations. Better margins from advanced artificial intelligence (AI) revenue, operating leverage and favourable foreign exchange movements supported profitability. Management indicated that it intends to reinvest profits to strengthen its competitive position in AI.
The company also said it did not expect any material business impact from PERM filings.
For FY27, inorganic contributions are expected to account for 62 bps of the services revenue growth guidance and 87 bps of the overall company revenue growth guidance. In Q2, inorganic growth contributed 97 bps.
What Drove HCLTech's Margin Improvement?
Margin performance benefited from a combination of operating efficiencies and business mix.
Margin tailwinds included:
- Advanced AI revenue contributed 32 bps.
- Operating leverage added 50 bps.
- Foreign exchange movements provided a 23 bps benefit.
Margin headwinds included:
- Higher restructuring costs had a 22 bps impact.
- The HP telecom solutions acquisition affected margins by 25 bps.
Despite the sequential improvement in profitability, brokerages flagged the possibility of margin pressure in the second half, particularly from wage hikes and other costs.
What Brokerages Said On HCLTech After Q2 Results
Citi On HCLTech: Maintains Sell, Raises Target Price To Rs 1,050
Citi retained its Sell rating on HCLTech while raising its target price to Rs 1,050 from Rs 1,030.
The brokerage described the quarterly performance as decent, with the margin surprise providing support. However, the software business disappointed, and the services revenue guidance pointed to a potentially slower second half.
Citi said management remained confident of delivering services growth slightly above the midpoint of its guidance range. However, it flagged the sustainability of the improved margins as a key issue to watch.
The brokerage also noted that HCLTech trades at a 20%-25% valuation premium to peers Tata Consultancy Services (TCS) and Infosys, leaving limited room for disappointment if growth or margins weaken.
Kotak Securities On HCLTech: Retains Reduce, Raises Target To Rs 1,220
Kotak Securities maintained its Reduce rating on HCLTech but increased its target price to Rs 1,220 from Rs 1,200.
The brokerage said stronger services growth and better-than-expected margins were offset by weakness in the products business. It also highlighted the improvement in bookings, supported by large deal wins.
Kotak revised its FY27 organic revenue growth forecast to 1.6%-3.1%, compared with the earlier guidance range of 1%-4%. The brokerage's assessment reflects concerns over the contribution from the products business and the valuation already assigned to the stock.
JPMorgan On HCLTech: Maintains Underweight, Target At Rs 1,080
JPMorgan retained its Underweight rating on HCLTech with a target price of Rs 1,080.
The brokerage said the midpoint of the revised guidance indicated a modest reduction in the growth outlook, potentially signalling a slowdown in underlying momentum.
It also flagged margin risks in the second half of FY27, estimating that wage hikes could create around 140 bps of headwinds. With the company retaining its EBIT margin guidance at 17.5%-18.5%, the brokerage sees execution as important to sustaining profitability.
JPMorgan added that slower organic growth around the guidance midpoint could raise questions about HCLTech's valuation premium.
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