HCL Tech Q2 Results: Should You Buy, Sell, or Hold After an AI-Led Earnings Beat?

Mumbai | October 14

HCL Technologies reported a robust performance for the September quarter, driven by margin expansion, strong deal wins, and rising traction in artificial intelligence-led services. The results, which topped market expectations, signal improved demand visibility across verticals. PL Capital maintains a ‘BUY’ rating on the stock with a target price of ₹1,760, implying further upside potential.

Solid Quarter with Margin Recovery and Strong Deal Wins

HCL Technologies declared its Q2 FY26 results on Monday, reporting a 14.8% sequential rise in net profit to ₹4,410 crore, supported by higher margins and improved operating efficiency. The IT major, which focuses on digital transformation, cloud, and engineering services, also recorded revenue growth of 2.4% quarter-on-quarter in constant currency terms, taking total revenue to ₹29,170 crore.

Operating margins expanded by 160 basis points to 17.9%, the highest in five quarters, aided by better software profitability and tighter cost control. The board announced an interim dividend of ₹12 per share, reflecting the company’s continued commitment to shareholder returns.

The company raised its FY26 services-revenue growth guidance to 4–5%, while maintaining its EBIT margin outlook at 17–18%. Total contract value (TCV) for the quarter stood at $2.57 billion, up 43% sequentially — highlighting healthy deal momentum despite global demand headwinds.

Chairman and CEO C Vijayakumar said the company’s AI strategy is delivering tangible results.
“Our AI-led services revenue crossed $100 million this quarter and now contributes around 3% of total revenue. We are scaling the AI Force platform across multiple industries, and expect this contribution to double over the next year,” he said.

He added that client decision-making cycles are improving, particularly in BFSI, manufacturing, and telecom verticals.

PL Capital’s Take: Stable Growth, Attractive Valuation

According to PL Capital, HCL Tech’s Q2 performance reinforces its standing as one of India’s most consistent large-cap IT players, combining steady execution with valuation comfort. The brokerage projects revenue CAGR of 7% and earnings CAGR of 10.2% between FY25 and FY28, supported by stable margins near 18%.

“HCL Tech’s upgraded guidance and increasing AI adoption point to sustained double-digit earnings potential,” PL Capital noted. “At 20× FY27 EPS, valuations remain attractive given the company’s 4% dividend yield and strong balance sheet.”

PL Capital has valued HCL Tech at 22× September 2027 EPS, assigning a target price of ₹1,760 compared with the current market price of ₹1,495.

Key Metrics

What should investors be seeing next

HCL Tech’s Q2 results reflect a company that has successfully navigated global uncertainty by embedding AI into its core operations and improving delivery efficiency. With deal wins rising and profitability improving, PL Capital expects the stock to see gradual re-rating in the medium term.

While near-term cost pressures may cap upside, long-term investors should stay invested and use any correction as an opportunity to accumulate. The blend of steady growth, attractive yield, and strong cash flows makes HCL Tech one of the more resilient large-cap IT bets on Dalal Street.

PL Capital stance: BUY | Target Price ₹1,760

For the detailed PL Capital report and in-depth analysis, click here