HCL Technologies Limited — Q2 FY26 earnings call

Call held 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

  • 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.

What they filed

Q1 FY27: revenue up 13.9%, net profit up 20.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue28,862 29,890 30,246 30,349 31,942 +11%33,872 +13%33,981 +12%34,579 +14%
EBITDA6,369 6,860 6,482 6,035 6,545 +3%7,412 +8%6,712 +4%6,870 +14%
Net profit4,237 4,594 4,309 3,844 4,236 −0%4,082 −11%4,490 +4%4,626 +20%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • Full-year Services revenue growth Revenue · FY26 · High confidence 4%-5%
    On the back of standout quarter and sustained growth momentum, we are raising our full-year Services revenue growth guidance to 4%-5% in constant currency terms.

    — Shiv Walia, Chief Financial Officer

  • Full-year Company-level revenue growth Revenue · FY26 · High confidence 3%-5%
    Given the softness in Software segment, due to decline in perpetual license revenue, we are keeping the company-level guidance unchanged at 3%-5% in constant currency terms.

    — Shiv Walia, Chief Financial Officer

Margin

  • Full-year EBIT margin Margin · FY26 · High confidence 17%-18%
    We remain on track to deliver our full-year EBIT margin guidance of 17%-18%.

    — Shiv Walia, Chief Financial Officer

  • Wage revision cycle impact on EBIT margin Margin · Q3 · High confidence 70-80 basis point impact
    The wage revision cycle will kick in Q3, the revision is expected to be similar as last year. Q3 is expected to have 70-80 basis point impact and Q4 to have an incremental impact of 40-50 basis point.

    — Shiv Walia, Chief Financial Officer

  • Incremental wage revision cycle impact on EBIT margin Margin · Q4 · High confidence 40-50 basis point
    Q3 is expected to have 70-80 basis point impact and Q4 to have an incremental impact of 40-50 basis point.

    — Shiv Walia, Chief Financial Officer

Restructuring Impact

  • Full-year restructuring impact on margins Restructuring Impact · full year · Medium confidence slightly on the higher side than 40 basis points

    Previously around 40 basis points → slightly on the higher side than 40 basis points

    in July, we announced around 40 basis point impact of restructuring for the full year. We expect this to be slightly on the higher side for the full year based on visibility we have right now.

    — Shiv Walia, Chief Financial Officer

Client Engagement

  • AI Force platform deployment to top clients Client Engagement · Medium confidence 100 top clients

    From 47 accounts today

    Our Al Force platform is now deployed across 47 accounts, up from 35 last quarter, and this is the key solution enabler for most of our wins. I would also like to mention that we are working towards the goal of leveraging our Al Force platform to 100 of our top clients.

    — C. Vijayakumar, CEO and Managing Director

Bookings

  • Net new booking run rate Bookings · High confidence $2.5 billion

    From $2 billion today

    Yes, we had mentioned that we want to up our run rate from $2 billion to in and around $2.5 billion. That is something which we have been working with a lot of rigor and science behind it. We think we will get there soon. This quarter obviously was $2.6 billion without a mega deal. Pipeline is good. Our win ratios are good, and we are well set up for a $2.5 billion kind of run rate.

    — C. Vijayakumar, CEO and Managing Director

AI Impact

  • Productivity improvement in BPO business due to AI AI Impact · Medium confidence 40% to 50%
    We think the biggest impact is on the BPO business, which could be as much as 40% to 50%.

    — C. Vijayakumar, CEO and Managing Director

  • Productivity improvement in SDLC due to AI AI Impact · Medium confidence 25% to 30%
    In SDLC, 25% to 30% is what we think is doable with a lot of maturity.

    — C. Vijayakumar, CEO and Managing Director

  • Productivity improvement in IT Ops, application support and maintenance due to AI AI Impact · Medium confidence 10% to 15%
    In IT Ops, application support and maintenance, it will be 10% to 15%, but it also depends on where you are in the automation journey.

    — C. Vijayakumar, CEO and Managing Director

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.

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