HCL Technologies reported a strong Q2 FY26 performance, beating revenue and margin estimates as multiple brokerages — including Jefferies, CLSA, Nomura, and Motilal Oswal — highlighted its leadership in AI services and steady execution across verticals.
Why Are Brokerages Bullish on HCL Technologies After Q2 FY26 Results?
HCL Tech reported revenue of USD 3.64 billion, up 2.4% QoQ in constant currency, with EBIT margin improving 110 bps QoQ to 17.4%. The company’s total contract value (TCV) rose 42% QoQ and 16% YoY to USD 2.57 billion — the highest among top Indian IT players. With over 47 clients now adopting its “AI Force” platform, the company’s AI-led revenue surpassed USD 100 million for the first time, positioning it ahead of peers in automation-driven services.
What Are Global Brokerages Saying?
- Jefferies: Maintains Buy with a TP of ₹1,730, citing strong deal wins and premium valuations supported by FCF conversion.
- CLSA: Retains Outperform with TP ₹1,660; notes margin recovery potential to 18–19% in FY27.
- Nomura: Reiterates Buy with TP ₹1,660, emphasizing AI strength and asset-light focus.
- Morgan Stanley: Maintains Equal Weight with TP ₹1,680, acknowledging strong AI-led growth momentum.
- MOTILAL OSWAL: Keeps Buy at TP ₹1,800, citing best-in-class execution and margin profile.
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How Are Margins and Growth Guidance Shaping Outlook? The company reiterated its FY26 services growth guidance at 4–5% YoY in constant currency, with EBIT margins guided at 17.5% for FY26 and recovery toward 18–19% in FY27. Management expects steady deal momentum led by large infrastructure contracts and continued enterprise AI adoption, with margins improving as cost restructuring normalizes by mid-FY27.
Brokerages uniformly highlighted that HCL Tech’s investments in generative AI and IP-led offerings have started yielding measurable outcomes. AI services are expected to contribute nearly 5% of total revenue by FY26-end. Analysts also pointed to a strong balance sheet, healthy dividend payout, and superior cash conversion rates exceeding 100% of PAT.
Why Is HCL Tech Viewed as a Stable Compounder? With its focus on high-margin B2B services, localization, and AI-driven transformation, HCL Tech is seen as a steady compounder among Indian IT majors. The company’s asset-light model and stable EBIT outlook support continued shareholder value creation through FY27.
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The alignment of broker targets, robust deal pipeline, and AI monetization visibility underscore HCL Tech’s role as a key IT outperformer for FY26–FY27, likely to maintain steady growth with expanding client base and strong cash generation.
Investor Takeaway: Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that HCL Tech’s consistent margin delivery, AI monetization, and top-tier deal wins make it a dependable large-cap for investors seeking steady compounding returns in FY26 and FY27.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment adviser before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
