HCL Technologies (HCLT IN) – Q3FY26 Result Update – Strong performance, deal wins lays foundation for sustainable momentum – BUY
Published on 13 Jan 2026
The revenue growth performance (+4.2% QoQ CC) was above our estimates (+3.0% QoQ CC), aided by strong seasonality of HCLSoftware (+28.1% QoQ CC). Services business performance was also strong (+1.8% QoQ CC) defying the furloughs and holidays impact. The service business growth was majorly led by ER&D segment that reported another quarter of strong growth (+3.1% QoQ CC vs 2.2% QoQ CC LQ). The service-led growth was largely aided by ex-top 20 accounts (+2.3% QoQ), which implies the decision making and execution cycle remains strong at the lower-end of the pyramid. Again, the advanced AI revenue growth (19.9% QoQ CC) is largely a component of short-burst deals that further validates the velocity of smaller deal remains strong. The new deal TCV reported at USD3.0b, which includes one of the mega deals (USD473m) of five-year strategic engagement. We believe the service-led growth should continue its momentum in FY27/FY28 on the back of strong order wins and growing AI revenue stream. Hence, we are revising the topline CC growth upward by 30bps/20bps to 7.0% and 7.7% for FY27E/FY28E. Despite the beat on margins in Q3, we expect Q4 will see some normalization, while additional new labour code would also keep the margin in check. The stock is currently trading at 22x and 19x FY27E/FY28E EPS. We assign 22x to FY28 EPS to arrive at a TP of 1,910.
