HCLTech vs TCS Q4 FY26

HC

HCLTech

Q4 FY26 · Information Technology

HCL Tech reported Q4 FY26 revenue of $3.68B, up 2.4% YoY but down 3.3% QoQ, missing expectations due to delayed procurement decisions and discretionary spending cuts by two large US telecom clients. Services revenue grew 4.2% YoY while software declined 14% YoY. Full-year revenue grew 3.9% in constant currency, with services up 4.8%. EBITDA margin (ex-restructuring) was 17.7%, down 20bps YoY. Management guided FY27 revenue growth of 1-4% (services 1.5-4.5%) and EBIT margin of 17.5-18.5%, reflecting headwinds from two client-specific reductions (~50bps) and continued soft discretionary spend. AI momentum remains strong with $155M quarterly advanced AI revenue (+6.1% QoQ) and a $100M+ AI factory deal. Key risk: further escalation of tariff volatility or client-specific issues could pressure growth.

Guidance read

FY27 revenue growth 1-4% CC: Consolidated revenue growth guidance for FY27 in constant currency; services growth 1.5-4.5%. FY27 EBIT margin 17.5-18.5%: Operating margin guidance for FY27, excluding impact of acquisitions. Two clients to cause ~50bps growth headwind in FY27: Specific client reductions in manufacturing and retail will impact growth by about 50 basis points. AI native services to grow 25-30%: Management expects advanced AI services (AI factory, custom silicon) to grow at 25-30% annually.

Risk read

Key risks include Telecom discretionary spending cuts may persist — Two large US telecom clients cut discretionary spend in Q4; impact expected to continue through calendar 2026.; AI deflation could accelerate beyond 2-3% — Analyst questioned if deflation from AI could expand; management acknowledged risk but maintained 2-3% estimate for HCL.; Software revenue volatility from government deals — Q4 software revenue missed due to delayed US government decisions; timing of closures unpredictable.; Geopolitical uncertainty in Europe — Management noted softness in Europe due to geopolitical escalations, which could worsen..

Promise ledger

Of 1 tracked promise, management 0 met, 0 close, 1 missed.

TC

TCS

Q4 FY26 · Information Technology

TCS exited Q4 with 1.2% sequential constant-currency growth after three quarters of sequential recovery, while rupee revenue rose 9.6% YoY to ₹70,698 crore. The quarter's signal is not just headline growth, but demand stabilization: $12 billion TCV, three mega deals, and client additions across every revenue band after roughly two years. AI is becoming a commercial wedge, with annualized AI revenue above $2.3 billion, but management also admitted traditional service lines may taper as AI productivity benefits are passed to clients. Operating margin held at 25.3% in Q4, helped by currency and operating levers, while wage hikes and build-partner-acquire investments will pressure FY27. Outlook is cautiously constructive: deal momentum and AI demand are improving, but macro/geopolitical risk, BFSI caution, elevated SG&A, and uncertain AI cannibalization timelines limit conviction.

Guidance read

FY27 growth: normal first-half seasonality, no quantified target for FY27: Management expects FY27 to start with a normal Q1/Q2 seasonal pattern and is positive on international growth, but refused to quantify growth. AI revenue expected to outrun traditional-services taper for multi-year: AI revenue is expected to grow faster and eventually overcompensate for tapering traditional services revenue, but management could not predict the timing. Wage hikes: 150-200 bps margin headwind expected for Q1 FY27: Wage hikes are expected to create a 150-200 bps margin headwind in the next quarter. Medium-term margin aspiration: 26-28% for multi-year: Longer term, management wants margins to move toward 26-28%, while continuing investment in build, partner, and acquire initiatives.

Risk read

Key risks include AI cannibalization may arrive before AI revenue offset — AI-led productivity may cannibalize traditional services revenue before AI revenue fully offsets the decline.; FY26 constant-currency decline keeps recovery burden high — FY26 constant-currency revenue declined 2.4%, and an analyst flagged a 5-6 percentage point growth gap versus the closest competitor.; SG&A investment may be structurally higher — SG&A may stay structurally elevated because partnership, recruitment, training, and new-business investments are now flowing through the cost base.; Geopolitical exposure could broaden through secondary effects — Management framed geopolitical impact as limited to Middle East and travel/transportation, but acknowledged secondary supply-chain disruption could broaden the hit..

Promise ledger

Of 2 tracked promises, management 0 met, 0 close, 2 missed.