HCL Tech Q2 FY26 Results: Revenue Beats Estimates, Profit Jumps 10.2%
HCL Technologies has reported robust second-quarter results for fiscal year 2026, demonstrating strong performance across key financial metrics. The IT services major posted better-than-expected numbers with significant growth in revenue, EBIT, and net profit, signaling a positive turnaround in the technology services sector.
Quarterly Performance Highlights
- Revenue grows 5.24% to ₹31,942 crore
- EBIT surges 11.33% to ₹5,552 crore
- EBIT margin expands 94 basis points to 17.22%
- Net profit increases 10.2% to ₹4,235 crore
- Constant currency revenue growth at 2.5%
- Deal wins remain strong at $2.5 billion
- AI business crosses $100 million revenue milestone
- Net employee addition of 3,500 professionals
Financial Performance Deep Dive
Q2 FY26 Key Metrics
The company's revenue showed impressive growth, increasing to ₹31,942 crore from ₹30,349 crore in the previous quarter, representing a 5.24% quarter-on-quarter increase. This performance exceeded market expectations and demonstrates HCL Tech's ability to capitalize on improving market conditions.
More notably, profitability metrics showed even stronger growth. EBIT (Earnings Before Interest and Taxes) jumped 11.33% to ₹5,552 crore, while net profit saw a healthy 10.2% increase to ₹4,235 crore compared to the previous quarter's ₹3,843 crore.
Margin Expansion and Operational Efficiency
One of the standout features of HCL Tech's Q2 performance was the significant margin expansion. The EBIT margin improved by 94 basis points to 17.22%, up from 16.28% in the previous quarter. This improvement reflects the company's focus on operational efficiencies and favorable deal mix.
The margin expansion was driven by multiple factors including better utilization rates, cost optimization initiatives, and a favorable currency environment. The company's continued focus on high-margin services and operational discipline contributed to this impressive performance.
Deal Wins and Business Momentum
| Business Metric | Q2 FY26 | Q1 FY26 | Growth |
|---|---|---|---|
| Total Deal Wins | $2.5 Billion | $1.88 Billion | +32.98% |
| Constant Currency Growth | 2.5% | 1.8% | +70 bps |
| Net Employee Addition | 3,500 | 1,900 | +84.21% |
| Gross Employee Addition | 5,200 | 3,800 | +36.84% |
Deal momentum remained strong with total contract value of $2.5 billion, showing significant improvement from the previous quarter's $1.88 billion. This represents a nearly 33% quarter-on-quarter increase in deal wins, indicating robust demand for HCL Tech's services.
The constant currency revenue growth of 2.5% exceeded expectations and demonstrated the company's ability to navigate global economic uncertainties while maintaining growth trajectory.
Strategic Business Developments
AI Business Crosses $100 Million Milestone: HCL Technologies announced that its advanced AI business has crossed the $100 million revenue mark, positioning the company as a leader in the artificial intelligence services space. This achievement is significant given the challenges many IT firms face in monetizing their AI investments.
Workforce Expansion: Contrary to the industry trend of headcount reduction, HCL Tech added 5,200 gross employees during the quarter with net addition of 3,500 professionals. This represents a substantial increase from the previous quarter's net addition of 1,900 employees, reflecting confidence in future growth prospects.
Service Revenue Guidance: The company maintained its service revenue growth guidance of 4-5% for FY26, indicating management's confidence in sustaining the current growth momentum despite global economic headwinds.
Sector-wise Performance Analysis
Key Vertical Performance
BFSI Segment: Showed improved performance with revenue uptick, benefiting from increased technology spending in the banking and financial services sector. The segment demonstrated resilience despite global banking uncertainties.
Life Sciences and Healthcare: Demonstrated recovery with 1.5% improvement compared to the previous quarter, though year-on-year performance still shows some pressure. The sector is showing signs of stabilization after previous quarters of challenges.
High-Tech and Manufacturing: Continued to show steady growth, driven by digital transformation initiatives and engineering services demand. The segment benefited from increased client spending on cloud and digital initiatives.
Retail and CPG: Maintained stable performance with moderate growth, reflecting the cautious spending environment in consumer-facing industries.
Guidance and Future Outlook
HCL Technologies maintained its FY26 revenue growth guidance in the range of 3-5% for services, indicating management's confidence in sustaining the current growth momentum. The company's performance in Q2 positions it well to achieve the upper end of this guidance.
The EBIT margin guidance of 16-18% remains intact, with the current quarter's performance at 17.22% sitting comfortably within this range. The company's focus on margin improvement initiatives and operational efficiencies is expected to support this guidance.
Management commentary suggests cautious optimism for the remainder of the fiscal year, with expectations of continued growth in key verticals and geographies. The company's strong deal pipeline and focus on high-growth areas like AI and cloud services provide a solid foundation for future performance.
Market Impact and Investor Sentiment
The strong Q2 results are likely to positively impact investor sentiment toward HCL Technologies and the IT sector broadly. The better-than-expected performance across key metrics, coupled with strong deal wins and improved outlook, positions the company favorably in the competitive IT services landscape.
The company's strategic focus on high-growth areas like AI and digital services, combined with operational discipline, provides a strong foundation for sustained growth in the coming quarters. The positive results may also signal a broader recovery in the IT services sector after several quarters of muted performance.
Challenges and Risk Factors
While the quarterly performance has been strong, certain challenges remain:
- Global economic uncertainty and potential impact on client spending patterns
- Regulatory changes including H-1B visa fee revisions and compliance requirements
- Intense competitive pressure in the IT services market affecting pricing
- Currency volatility impacting margins and international revenue
- Need for continuous innovation and skill development to maintain competitive edge
- Geopolitical tensions affecting global operations and client relationships
- Rapid technological changes requiring significant ongoing investments
Industry Context and Competitive Positioning
HCL Tech's strong performance comes at a time when the IT services industry is experiencing mixed signals. While some companies are facing challenges due to reduced client spending on discretionary projects, HCL's focus on cost optimization and high-value services has helped it maintain growth momentum.
The company's achievement of crossing $100 million in AI revenue positions it well against competitors who are still struggling to monetize their AI investments. This early success in AI services could provide a significant competitive advantage in the coming years as enterprises increasingly adopt artificial intelligence solutions.
Disclaimer: This analysis is based on publicly available information and is for educational purposes only. It does not constitute investment advice. Readers are advised to consult with financial advisors and refer to official company filings for comprehensive understanding. Past performance is not indicative of future results. All financial figures are based on company reports and may be subject to revision.