HCLTech Q2 FY26 Results & AI Growth

HCLTech's September quarter results for fiscal year 2026 showcase solid operational performance, characterised by healthy revenue growth, expanding profit margins, and robust deal bookings. This analysis provides a comprehensive breakdown of the results for investors and market analysts, answering key questions about the company's financial health, segment-wise performance, and strategic direction, particularly in the burgeoning field of Artificial Intelligence (AI). While year-on-year profit growth appeared muted due to planned investments, the sequential momentum and retained full-year guidance signal management's confidence in their execution strategy.

Table of Contents

1. HCLTech Q2 FY26 Performance: Key Financial Metrics
2. How Did HCLTech's Different Business Segments Perform?
3. What is HCLTech's Strategy for Artificial Intelligence (AI)?
4. Understanding HCLTech's Profitability and Cash Flow
5. What is the Outlook for HCLTech's Guidance and Hiring?
6. What is the Investment Outlook for HCLTech Stock?
7. Frequently Asked Questions (FAQs)

HCLTech Q2 FY26 Performance: Key Financial Metrics

For investors seeking a quick assessment, HCLTech's headline numbers for the second quarter of FY26 demonstrate steady growth and operational discipline. The performance indicates a normalising demand environment, even as the closure of very large deals remains selective across the industry.

• Revenue: Rs. 31,942 crore, an increase of 10.7% year-on-year (YoY) and 5.2% quarter-on-quarter (QoQ).

• Dollar Revenue: $3,644 million, growing 5.8% YoY and 2.8% QoQ.

• Constant Currency (CC) Growth: 4.6% YoY and 2.4% QoQ.

• EBIT (Earnings Before Interest and Taxes): Rs. 5,550 crore, with a margin of 17.4%, showing a sequential improvement of approximately 70-120 basis points.

• PAT (Profit After Tax): Rs. 4,235 crore, which was flat YoY but up 10.2% QoQ.

• Net New Bookings (Total Contract Value): A record $2.6 billion, achieved for the first time without reliance on a single mega-deal.

• Interim Dividend: Rs. 12 per share, marking the company's 91st consecutive quarterly payout to shareholders.

How Did HCLTech's Different Business Segments Perform?

HCLTech's growth was broad-based, with notable contributions from its core services and engineering divisions. Here is a breakdown of the performance across its business verticals and geographic markets.

Performance by Service Line

• Services (IT & Business Services): This core segment led the growth with approximately 2.5% QoQ constant currency growth, driven by steady demand for application modernisation and cloud services.

• ER&D (Engineering and R&D): Continued its double-digit YoY growth trajectory, showing strong traction in product engineering, software-defined solutions, and silicon engineering.

• Software (HCLSoftware): Reported an Annual Recurring Revenue (ARR) of around $1.06 billion. While its profitability discipline is strong, softness in year-on-year product revenue remains an area to monitor.

Performance by Industry Vertical

• Life Sciences & Healthcare: Led the growth among verticals, with resilient demand for cloud migration, data analytics, and platform-based solutions.

• Financial Services: Remained stable, with opportunities from vendor consolidation helping to offset caution due to macroeconomic factors.

• Manufacturing & Automotive: Showed signs of improvement, although decision-making cycles for new projects are still elongated.

• Technology: Remained steady, supported by infrastructure management, cloud operations, and the scaling of Generative AI pilot projects into full-scale programmes.

Performance by Geography

• North America: Delivered steady growth.

• Europe: Showed resilience with strong deal bookings.

• Rest of World: Performance was mixed but is now stabilising.

For a deeper look into HCLTech share price, financials, trends, and valuation metrics, visit the complete HCLTech company profile.

What is HCLTech's Strategy for Artificial Intelligence (AI)?

HCLTech is positioning itself as an "AI-first services" company, with a strategy focused on integrating AI to enhance productivity and create new revenue streams.

• AI Revenue Growth: The company's advanced AI revenue surpassed $100 million in the quarter, contributing to approximately 3% of total revenue and indicating accelerating monetisation.

• AI-First Services Strategy: Management is focused on infusing Generative AI across all service lines—including application development, cloud, infrastructure, and ER&D—to boost productivity and increase revenue per employee.

• Asset-Light Approach: HCLTech aims to pursue AI infrastructure partnerships prudently to avoid risks to its balance sheet, maintaining an asset-light model. For investors, the immediate benefit of AI is expected from productivity gains, with direct revenue contribution set to grow over the medium term.

Understanding HCLTech's Profitability and Cash Flow

HCLTech demonstrated strong control over its costs and maintained excellent cash generation, key signals of a healthy underlying business.

• Margin Drivers: Profitability in Q2 was driven by optimising the employee pyramid, increased automation, higher utilisation rates, and reduced subcontracting costs. These gains helped offset restructuring costs embedded in the quarter.

• Upcoming Headwinds: Wage hikes, effective from October (averaging ~7%), will present a near-term headwind to margins.

• Cash Flow: Cash generation remains robust. The free cash flow (FCF) to Net Income ratio over the last twelve months is approximately 125%, and Return on Invested Capital (ROIC) has improved to over 38% for the company and over 45% for the services business.

What is the Outlook for HCLTech's Guidance and Hiring?

Management's decision to retain its full-year guidance underscores its confidence, supported by a strong deal pipeline and recent booking success.

• FY26 Guidance: Revenue guidance for the full fiscal year has been retained, backed by the $2.6 billion in net new bookings from Q2 and a healthy deal pipeline.

• Margin Outlook: The company is trending towards mid-to-high teens for its profit margin, with operational efficiencies expected to absorb the impact of wage hikes and product revenue seasonality.

• Hiring Trends: HCLTech saw a net addition of around 3,500 employees, aligning with improving demand. The company continues to pivot towards local hiring in key markets to reduce its dependency on H1-B visas.

If you’re comparing performance across IT majors, check how TCS Q2 FY26 results reflect its own AI-driven growth path and investor sentiment.

What is the Investment Outlook for HCLTech Stock?

For potential investors, evaluating HCLTech's stock involves weighing its strong operational execution against macroeconomic headwinds and internal cost pressures.

Positive Signs for Investors (Bull Case)

• Strong Deal Momentum: The ability to secure over $2.5 billion in new deals without a mega-deal suggests a healthier, more predictable revenue run-rate.

• Margin Resilience: The recovery in profit margins before the impact of wage hikes demonstrates strong operational discipline.

• Improved Revenue Visibility: The quality and diversity of new bookings provide better forward visibility into future earnings.

• AI-Led Leverage: The dual benefit of AI—as a revenue source and a productivity driver—could unlock significant operating leverage.

Potential Risks to Consider (Bear Case)

• Margin Pressure: The upcoming wage hike cycle and seasonal weakness in the software segment could cap near-term margin expansion.

• Software Segment Performance: The year-on-year softness in the HCL Software division requires careful monitoring.

• Macroeconomic Uncertainty: Caution in discretionary spending in the US and Europe could delay the conversion of some deals in the pipeline.

• Rising Talent Costs: Increased talent costs and localisation efforts could compress operating levers if revenue growth slows unexpectedly.

Watch this NDTV Profit video analysis for market insights on how HCLTech’s Q2 numbers could impact its stock movement in the upcoming trading sessions.

Frequently Asked Questions (FAQs)

What were the key highlights of HCLTech's Q2 FY26 results?
The key highlights were strong revenue growth of 10.7% YoY to Rs. 31,942 crore, record net new deal bookings of $2.6 billion without a mega-deal, and a sequential improvement in EBIT margin to 17.4%. The company also announced a dividend of Rs. 12 per share.

How did HCLTech's AI business perform in Q2 FY26?
HCLTech's advanced AI business is showing strong momentum, with revenue surpassing $100 million for the quarter. This represents about 3% of total revenue and signals that the company's "AI-first" strategy is beginning to contribute meaningfully to its top line.

What is HCLTech's dividend and financial guidance for FY26?
HCLTech declared an interim dividend of Rs. 12 per share. The company has retained its full-year revenue and margin guidance for FY26, indicating confidence in its ability to navigate wage hikes and other headwinds through strong execution and a healthy deal pipeline.

Is HCLTech a good stock to buy after its Q2 FY26 results?
The results present a "steady-to-improving" picture. For long-term investors, the stock's value proposition depends on sustained deal bookings, effective margin management, and continued gains from its AI strategy. Short-term, the stock may see range-bound movement as the market digests the impact of upcoming wage hikes.

What are the main risks for HCLTech moving forward?
The primary risks include potential margin compression from wage increases and localisation, continued softness in the HCLSoftware segment, and macroeconomic uncertainty in key markets like the US and Europe affecting discretionary IT spending.