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    HCL Technologies

    HCLTECH
    Information Technology·13 Oct 2025
    Management Summary

    HCL Technologies delivered a strong Q2 FY26, characterized by broad-based revenue growth, significant margin expansion, and exceptional new bookings. The company achieved a milestone in Advanced AI revenue, exceeding $100 million, and saw robust performance in its Services business. Management expressed confidence in its AI-led strategy and raised its full-year Services revenue growth guidance, while maintaining overall company guidance and EBIT margin targets.

    Highlights

    8

    • Total revenue reached $3,644 million, growing 2.4% sequentially and 4.6% year-on-year in constant currency.

    • Services business revenue grew 2.5% sequentially and 5.5% year-on-year in constant currency.

    • Operating margins expanded by 116 basis points sequentially to 17.5%.

    • New bookings hit a record $2.6 billion, marking the first time crossing $2.5 billion without a mega deal.

    • Advanced AI revenue surpassed $100 million, representing about 3% of total revenue.

    • Last 12-month ROIC for the company improved to 38.6%, up 290 basis points year-on-year.

    • Operating Cash Flow for the last 12 months stood at $2.62 billion, with Free Cash Flow at $2.48 billion.

    • Diluted EPS for the last 12 months was Rs. 62.57, an increase of 0.9% year-on-year, and an interim dividend of Rs. 12 per share was declared.

    Guidance & targets

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    CategoryTargetPriority
    Revenue
    Full-year Services revenue growth
    4%-5%
    		High
    Revenue
    Full-year Company-level revenue growth
    3%-5%
    		High
    Margin
    Full-year EBIT margin
    17%-18%
    		High
    Margin
    Wage revision cycle impact on EBIT margin
    70-80 basis point impact
    		High
    Margin
    Incremental wage revision cycle impact on EBIT margin
    40-50 basis point
    		High
    Restructuring Impact
    Full-year restructuring impact on margins
    slightly on the higher side than 40 basis points
    		Medium
    Client Engagement
    AI Force platform deployment to top clients
    100 top clients
    		Medium
    Bookings
    Net new booking run rate
    $2.5 billion
    		High
    AI Impact
    Productivity improvement in BPO business due to AI
    40% to 50%
    		Medium
    AI Impact
    Productivity improvement in SDLC due to AI
    25% to 30%
    		Medium
    AI Impact
    Productivity improvement in IT Ops, application support and maintenance due to AI
    10% to 15%
    		Medium
    2 min read

    Detailed Narrative

    HCL Technologies reported a robust Q2 FY26, with total revenue reaching $3,644 million, marking a 2.4% sequential growth and 4.6% year-on-year growth in constant currency. The Services business was a key driver, growing 2.5% sequentially and 5.5% year-on-year in constant currency, supported by strong performance in IT and Business Services and ER&D. While the Software business's Subscription, Support, and Professional Services revenue grew 9% year-on-year, overall software revenue saw a 3.7% decline due to lower perpetual license revenue, aligning with the company's strategy to prioritize subscription-based models.

    Profitability saw a significant boost, with operating margins expanding by 116 basis points sequentially to 17.5%. This improvement was attributed to the absence of Q1 one-off📎 impacts (positive 30 bps), higher utilization from Project Ascend (positive 50 bps), and forex gains (positive 56 bps), partially offset by restructuring expenses (negative 55 bps). The company's ROIC for the last 12 months improved across all segments, with the company ROIC at 38.6%, Services at 45.3%, and Software at 21.8%. Cash generation remained strong, with Operating Cash Flow at $2.62 billion and Free Cash Flow at $2.48 billion for the last 12 months, leading to a healthy net cash position of $3.29 billion. Diluted EPS for the last 12 months was Rs. 62.57, and an interim dividend of Rs. 12 per share was declared.

    New bookings were exceptional, reaching $2.6 billion, the first time crossing the $2.5 billion mark without any mega deals. This reflects strong demand across service lines, geographies, and verticals, with nearly all deals incorporating AI offerings. Advanced AI revenue reached over $100 million, constituting about 3% of total revenue, demonstrating the success of HCLTech's AI-first strategy. The company's AI Force platform is now deployed across 47 accounts, with a goal to expand to 100 top clients. Management highlighted significant productivity improvements expected from AI across BPO (40-50%), SDLC (25-30%), and IT Ops/Application Maintenance (10-15%).

    Looking ahead, HCLTech raised its full-year Services revenue growth guidance to 4%-5% in constant currency, while maintaining the overall company guidance at 3%-5% and EBIT margin guidance at 17%-18%. The company anticipates a 70-80 basis point impact on margins in Q3 and an additional 40-50 basis point impact in Q4 due to wage revisions, which are already factored into the guidance. Management acknowledged a slight increase in the full-year restructuring impact beyond the previously announced 40 basis points. The auto sector continues to face weakness, impacting decision-making, but the overall pipeline remains robust, and the company is confident in its ability to achieve a $2.5 billion net new booking run rate. HCLTech also noted its reduced reliance on H-1B visas, now down to a few hundred annually, and its focus on local hiring and training.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.