Why Did HCL Tech Beat Estimates and Raise Guidance in Q3?
HCL Technologies delivered a notable Q3 performance that stood out in an otherwise cautious IT spending environment. The company reported a clear beat on constant currency revenue growth, resilient margins despite restructuring costs, and an upward revision to FY26 guidance. More importantly, management commentary reinforced confidence in execution quality and the durability of deal momentum built over recent quarters.
Markets typically reward IT companies not just for beating quarterly numbers but for improving visibility. In HCL Tech’s case, the combination of better-than-expected execution, strong bookings, and a credible AI-led growth narrative has improved investor confidence in its medium-term earnings trajectory.
What Drove the Q3 Earnings Beat
HCL Tech reported constant currency revenue growth of 4.2 percent quarter-on-quarter, materially ahead of market expectations. This growth was broad-based, supported by strong execution in Engineering and R&D services, steady performance in core IT services, and a rebound in the software products segment.
Operating margins came in at 18.6 percent despite a one-time restructuring impact. Excluding these costs, margins remained largely stable year-on-year, highlighting management’s ability to balance growth investments with cost discipline in a challenging demand environment.
How Guidance Was Raised Despite Industry Caution
HCL Tech raised its FY26 revenue growth guidance to 4.0–4.5 percent in constant currency terms, with services growth guidance lifted to 4.75–5.25 percent. Management attributed this upgrade to strong deal wins over recent quarters and faster-than-expected ramp-ups.
Importantly, the company maintained its EBIT margin guidance of 17–18 percent for FY26, excluding one-time impacts from labour code adjustments but including restructuring costs. This suggests that management expects operational leverage and cost controls to offset ongoing investment requirements.
Where AI Is Changing the Growth Equation
HCL Tech’s advanced AI revenues grew at a strong pace, driven by agentic AI, physical AI, and AI factory engagements. The company has deployed its AI Force 2.0 platform across priority client accounts, deepening integration and increasing wallet share.
In addition, HCL Tech’s focus on AI-led legacy modernisation across BFSI and telecom clients has helped offset weakness in discretionary spending. This positioning differentiates the company from peers more reliant on pure discretionary IT budgets.
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Valuation and Investment View
BankNifty Positional Tip
Following the Q3 performance and guidance upgrade, HCL Tech’s valuation appears more supported by fundamentals than sentiment. The company’s diversified revenue mix, strong ER&D positioning, and improving deal pipeline provide a degree of downside protection.
That said, the stock’s performance will remain sensitive to global IT spending trends and execution consistency. Investors should track deal conversion, margin stability, and AI-led revenue contribution closely over coming quarters.
Investor Takeaway
HCL Tech’s Q3 results demonstrate that execution and positioning matter even in a cautious demand environment. The earnings beat, guidance upgrade, and AI-led momentum have strengthened medium-term visibility. Derivative Pro & Nifty Expert Gulshan Khera, CFP®, believes disciplined execution and selective exposure to quality IT names remain key as the sector navigates an uneven recovery. Read more expert market perspectives at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
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 advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
