HCL Technologies AI revenue and record deal wins strengthen growth visibility
HCL Technologies Ltd.
BUY
₹1,223
₹1,336.35
₹1,515
23.88%
Investment View
Centrum Broking’s October 12, 2026 report maintains a BUY rating on HCL Technologies following an in-line Q2 FY27 performance. The constructive view is supported by HCLTech’s client relationships, global scale, engineering expertise and AI intellectual property.
Centrum identifies Advanced AI, AI Force, strategic partnerships, Sovereign AI, AI Data Centers and record deal wins as important growth drivers. It also expects AI-led productivity gains and disciplined execution to support margins, although traditional-services spending remains subdued amid macroeconomic uncertainty.
Q2 FY27 Operating Performance
| Metric | Q2 FY27 | Change |
|---|---|---|
| Revenue | US$3.72 billion | Up 2.3% quarter on quarter and 2.6% year on year in constant currency |
| Services revenue | — | Up 3.0% sequentially and 4.0% year on year |
| Software revenue | — | Down 5.8% sequentially and 11.2% year on year |
| Software annual recurring revenue | US$1.13 billion | Up 7.8% year on year |
| Advanced AI revenue | US$219 million | Up 78% year on year; 5.9% of revenue versus 4.7% in Q1 FY27 |
| Annualised Advanced AI revenue | US$776 million | — |
Deal total contract value increased 27% year on year to US$3.26 billion in Q2 FY27, compared with US$2.41 billion in Q1 FY27 and US$2.60 billion in Q2 FY26. Centrum describes this as HCLTech’s second-highest quarterly bookings and strongest first-half bookings in its history.
Industry Growth
| Industry | Year-on-year growth in constant currency |
|---|---|
| Retail and CPG | 14.0% |
| Financial Services | 7.1% |
| Technology and Services | 5.9% |
| Manufacturing | 3.9% |
| Healthcare | Down 2.1% |
| Telecom | Down 2.1% |
Headcount increased by 6,450 sequentially to 230,339, while attrition rose 10 basis points to 12.8%. The board declared an interim dividend of Rs 12 per share.
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Financial Results and Margins
| Metric | Reported Q2 FY27 | Variance versus Centrum estimate |
|---|---|---|
| Revenue | Rs 3,56,200 million | 0.3% above estimate |
| EBIT | Rs 64,650 million | 5.7% above estimate |
| Profit after tax | Rs 51,320 million | 7.0% above estimate |
| EBIT margin | 18.2% | Expanded 131 basis points sequentially |
| EBIT margin excluding restructuring expenses | 19.0% | — |
Management attributed the margin improvement to AI-driven operational efficiencies, a higher-margin Advanced AI mix and operating leverage.
Management Outlook
Management retained FY27 guidance of 2.5% to 4.0% constant-currency revenue growth, 3.0% to 4.0% Services growth and an EBIT margin of 17.5% to 18.5%. It expects Services growth to be slightly above the midpoint, but remains cautious on macroeconomic conditions and discretionary spending, particularly among select Telecom and Manufacturing clients.
Estimates and Valuation
Centrum expects FY26 to FY29E revenue, EBITDA and profit after tax CAGR of 7.5%, 9.3% and 9.0%, respectively.
| Estimate | Revision to EPS |
|---|---|
| FY27E | Down 0.3% |
| FY28E | Down 2.0% |
| FY29E | Down 2.3% |
The revised target price is Rs 1,515, down from Rs 1,548. The valuation is based on an unchanged 19 times price-to-earnings multiple applied to September 2028E EPS of Rs 79.7.
Key Risks to the Thesis
- Macroeconomic uncertainty and weak discretionary spending.
- AI-driven deflation in traditional services.
- The need to reinvest productivity gains in AI capabilities, intellectual property and specialised talent.
Disclaimer: This is a summary of a research report published by the broker/research house identified above. The views, recommendations, target prices and estimates are those of the respective broker and do not represent DSIJ investment advice. The summary may be AI-assisted, hence please refer to the original report for complete details, disclosures and risks.
