HCLTECH.NS – HCL Technologies Ltd – Q3 FY26 – Concall Takeaways

HCL Technologies delivered a solid quarter in what many peers call a tough market. Revenue hit $3.793 billion, up 4.8% year-on-year and 4.2% sequentially in constant currency. The company crossed $15 billion in annualized run rate, showing real scale.

Services grew 5% year-on-year in constant currency, while engineering and R&D services jumped 10.8%. Software put in a strong show with 28.1% sequential growth, helped by seasonality and demand for data tools. Margins improved to 18.6%, up 111 basis points sequentially even after restructuring costs. Bookings reached $3 billion, the highest ACV in four years.

Management sounded confident, pointing to AI as the main driver across deals and services. They raised full-year guidance, a sign they see momentum holding.

Key Financial Highlights

• Total revenue: $3.793 billion (+4.8% YoY, +4.2% QoQ in CC)
• Services revenue: $3.379 billion (+5% YoY, +1.8% QoQ in CC)
• IT and business services: +3.8% YoY
• Engineering and R&D: +10.8% YoY, +3.1% QoQ
• Software revenue: $425 million (+3.1% YoY, +28.1% QoQ in CC)
• EBIT margin: 18.6% (up 111 bps QoQ; adjusted for restructuring 19.4%, down just 13 bps YoY)
• Net income: $537 million
• Net new bookings: $3 billion (+43% YoY, +17% QoQ)
• Headcount: 226,379 (slight decline QoQ)
• Attrition: 12.4% LTM (improving)
• Growth led by financial services (+8.1% YoY), technology (+14.1% YoY), and manufacturing (sequential lift).

Cash flow stayed healthy, with operating cash at 127% of net income over the last 12 months. Dividend came in at INR 20 per share.

Management Commentary: AI Embedded Everywhere

CEO C. Vijayakumar called it another standout quarter on revenue, bookings, and margins. He stressed AI as the core of growth – now part of every major deal, from service transformation to advanced offerings like Physical AI and AI Factory.

Advanced AI grew 19.9%. The company has trained over 38,000 employees in GenAI and rolled out AI Force across 60 priority accounts. Partnerships deepened with NVIDIA (new Physical AI lab), OpenAI, AWS, and others. Management got a shoutout in NVIDIA’s CES keynote.

On the market, Vijayakumar said traditional discretionary spend is slow, but new pockets around AI infrastructure are opening up. HCLTech is chasing those rather than waiting for old budgets to return. He stayed disciplined on deals – happy to walk away from ones that do not fit financially.

Software side saw wins in workload automation and agentic AI tools, plus acquisitions like Jaspersoft and Wobby to build a fuller data intelligence platform.

Recent buy of HPE’s Telco Solutions adds IP in telecom engineering, opening more non-linear growth.

Notable Deal Wins

• Mega deal with global apparel retailer: $473 million TCV over five years, using AI Force 2.0 for app and data modernization.
• Large US insurer consolidated providers with HCLTech, focused on GenAI-driven efficiency.
• European food major picked HCLTech for greenfield AI-powered digital setup.

These wins highlight how AI platforms are helping close big transformations.

Guidance Update

Management raised the bar:

• Services revenue growth: 4.75%-5.25% CC for FY26 (up from prior)
• Company-level revenue growth: 4%-4.5% CC
• EBIT margin: On track for 17%-18% (includes restructuring, excludes new labor code one-off)

Guidance excludes impact from recent acquisitions. At the upper end, Q4 services could exit stronger than last year.

Compared to peers who have kept or cut guidance, this raise stands out and signals confidence in the pipeline.

Analyst Q&A Insights

Question: How have client conversations on AI changed year-on-year? Where are budgets opening up?

Answer: Discussions are more holistic now – clients want to reimagine processes, not just point solutions. Enterprise adoption is still small and slow as they plan big changes. Real traction is in “Day Minus One” areas like custom silicon for edge inferencing and AI Factory buildouts for tech clients.

Question: Why strong retail growth this quarter? Any early contribution from the mega deal?

Answer: No contribution yet from the mega deal – it ramps up next quarter. Growth came from prior wins now in execution.

Question: Software looked strong – sign of broader IT spending pickup?

Answer: Mostly seasonality plus demand for data intelligence (Zeenea + Actian). Not yet a sign of wider budgets opening.

Question: Why does guidance still show possible Q4 slowdown at lower end despite big wins?

Answer: Guidance always has a range – 0.5% band is reasonable. Calculations include optimistic and pessimistic scenarios, then rounded.

Question: Opportunity in repurposing data centers for AI – feeding IMS demand?

Answer: Big potential over next five years as private data centers refresh, but not much traction yet. Current wins are with tech clients building massive AI capacity.

Question: Manufacturing vertical outlook amid tariff uncertainty and auto challenges?

Answer: Good traction in aero and defense. Mobility engineering stabilizing but early. Traditional manufacturing still muted due to tariffs.

Question: Normalized margins healthy – back to 18-19% band in FY27?

Answer: Structural margins fine (19.4% adjusted). Too early for FY27 guidance – will update later.

Question: Directionally better organic services growth in FY27 if no macro worsening?

Answer: On track to be fastest-growing large cap for fourth year. Confident in portfolio, but let’s see year-end run rate first.

Question: Bookings spiky – can $2.5 billion quarterly become new normal?

Answer: Bookings can vary, but rolling average over recent quarters points to around that level.

Question: Legacy modernization with AI – big demand driver ahead?

Answer: Yes, especially in custom-heavy verticals like financial services, telecom, healthcare. Expect it to become very significant in 2-3 years.

Question: Perpetual license uptick in software – strategy shift?

Answer: Marginal YoY rise due to one sovereign client. General push remains toward subscription.

Bottom Line

HCLTech keeps outperforming most Indian IT peers on growth while holding margins steady. The heavy bet on AI – from agentic platforms to Physical AI and factory buildouts – is paying off in bookings and deal wins. Guidance raise in a cautious market speaks volumes.

Risks remain around macro uncertainty and slow enterprise AI spend, but the pipeline sounds robust, and focus on new AI-related pockets looks smart. For investors, this feels like a company positioned well for an AI-led cycle, with discipline on profitability intact.