HCLTech Q2 Profit Jumps 21% to ₹5,132 Crore; Shares Rise 5%

HCLTech shares climbed nearly 5% in early trade on Tuesday after the Noida-based IT services company reported its highest-ever quarterly net income, a sharp improvement in margins and record first-half deal bookings. The company also nudged up the lower end of its revenue growth guidance for FY27, even as it described the demand environment as uncertain.

For the second quarter ended 30 September 2026, consolidated net income rose 21.2% year on year to ₹5,132 crore from ₹4,235 crore, and was up 11% sequentially. Revenue grew 11.5% to ₹35,620 crore and 3% over the previous quarter. In dollar terms, revenue came in at about $3.7 billion, up 2.2% year on year and 2.3% quarter on quarter, while constant-currency growth stood at 2.6% year on year.

The wide gap between rupee and dollar growth rates largely reflects the weaker rupee, which has flattered reported numbers for exporters across the sector this season.

Margins beat the Street

The standout number was profitability. Earnings before interest and tax (EBIT) margin expanded 131 basis points sequentially to 18.2%, ahead of the roughly 17.6% that analysts had pencilled in, according to brokerage notes cited by Business Standard and Business Today. The company said the quarter carried a restructuring charge of about 84 basis points; excluding it, margin would have been close to 19%.

The board declared an interim dividend of ₹12 per share. HCLTech also reported net cash of ₹24,503 crore, according to results coverage, leaving it ample room for buybacks or bolt-on acquisitions.

Bookings and AI carry the story

New deal bookings totalled $3.3 billion in the quarter, up 27% from a year earlier. Chief executive C Vijayakumar said the quarter took “first half bookings to a record high.” Business Standard and the Free Press Journal reported that the figure includes a large Mercedes-Benz AI engagement worth $1.14 billion, signed in early July.

Revenue from what the company calls Advanced AI reached $219 million, up 78% year on year and 28.4% sequentially in constant currency. That gives an annualised run rate of roughly $876 million, still a small share of total revenue but growing far faster than the core business. Analysts have tied the medium-term investment case for the stock to HCLTech’s partnerships with AI model developers, including OpenAI and Anthropic.

The company added 6,450 people during the quarter, including 6,136 freshers, taking total headcount past 2.3 lakh. Hiring at that scale, at a time when several peers have been cautious, signals management’s confidence that the deal pipeline will convert into billable work.

Guidance revised, but read the fine print

HCLTech now expects FY27 revenue growth of 2.5% to 4% in constant currency, against 1% to 4% earlier, and services growth of 3% to 4%, against 1.5% to 4.5% earlier. The EBIT margin band of 17.5% to 18.5% was retained.

Some coverage described the guidance as unchanged. The higher floor, however, is clear in the company’s own release. Business Today noted that acquisitions contribute about 87 basis points to the overall guidance and 62 basis points to services, which means the organic midpoint has not moved much. Management, according to Business Standard, described demand as “fluid and dynamic”.

Brokerages split on valuation

The stock, which closed at ₹1,223 on the NSE on Monday, traded about 4.9% higher at ₹1,282.70 around 9:38 am on Tuesday, according to Business Standard’s market blog. It helped lift the Nifty IT index, which was the best-performing sector in early deals.

Analysts were far from unanimous. Motilal Oswal retained a buy rating with a target of ₹1,450 and said it continued to like the company’s “all-weather portfolio”. Axis Capital set a Street-high target of ₹1,530, and Centrum kept a buy rating with a target of ₹1,515. Nomura raised its target modestly to ₹1,330 but pointed out that dollar revenue missed consensus and that acquisitions contributed meaningfully to growth. Nuvama, with a hold rating, flagged the software business as a drag, while 360 One said the stock’s valuation premium over peers limits further upside. Nirmal Bang maintained a sell call with a target of ₹1,014.

The split reflects a familiar tension in Indian IT this year. Large deal wins and AI-led work are visibly picking up, but discretionary spending among clients in telecom and manufacturing remains soft, and conversion of bookings into revenue has been slower than headline numbers suggest.

Why it matters for investors

HCLTech’s numbers come a few days after Tata Consultancy Services opened the earnings season with a 15% rise in second-quarter profit. Together, the two results suggest that the sector’s worst phase of margin pressure may be behind it, helped by a weak rupee, tighter cost control and a richer mix of AI work.

For investors, the more important signal is the bookings trend. A 27% jump in new deals, alongside record first-half wins, gives HCLTech better revenue visibility for the second half of FY27 than it had at the start of the year. The geographic mix also matters: results coverage showed India revenue growing much faster than the US business, though from a far smaller base.

The risks are equally clear. A rupee recovery would reverse part of the margin tailwind. Higher US interest rates and elevated energy prices could squeeze client budgets further. And the software segment, which commands a valuation premium, needs to return to growth for the stock’s multiple to hold.

What happens next

Attention now shifts to how quickly the Mercedes-Benz engagement ramps up. Reports differ on timing, with estimates ranging from the March 2027 quarter to the first quarter of FY28. Investors will also look for a recovery in HCLSoftware.

Results from Wipro and Tech Mahindra later this week will show whether HCLTech’s margin beat is company-specific or part of a broader sector trend. HDFC Bank’s numbers, also due this week, will set the tone for financials, the other heavyweight in the Nifty.