HCLTech vs Techm Q2 FY26

HCLTech delivered a strong Q2 FY26 with revenue of INR 31,942 crore, up 10.7% YoY, driven by broad-based growth across services and software. Services revenue grew 11.6% YoY to INR 29,116 crore, while EBIT margin improved to 17.4%. The company achieved a record booking of $2.6 billion without mega deals, signaling robust sales momentum. Advanced AI revenue crossed $100 million, representing ~3% of revenue, with strong pipeline in AI Factory and agentic AI. Management raised full-year services revenue guidance to 4-5% CC (from 3-5%), while maintaining company-level guidance at 3-5% CC. Key growth drivers include BFSI, tech, and retail/CPG verticals, with AI-led transformation deals gaining traction. Risk: Restructuring costs (55 bps impact) may persist into Q4, and auto sector slowdown continues to weigh on manufacturing.

Guidance read

FY26 services revenue guidance raised to 4-5% CC: Full-year services revenue growth guidance increased from 3-5% to 4-5% in constant currency, reflecting strong Q2 momentum. Company-level revenue guidance maintained at 3-5% CC: Overall company guidance unchanged due to softness in software segment. Full-year EBIT margin guidance maintained at 17-18%: Management reiterated EBIT margin guidance of 17-18% for FY26. Restructuring costs may be slightly higher than 40 bps for full year: Restructuring impact of 55 bps in Q2; full-year impact may exceed the earlier estimate of 40 bps, continuing into Q3 and possibly Q4.

Risk read

Key risks include Restructuring costs may exceed earlier estimates — Restructuring impact of 55 bps in Q2, with full-year impact potentially higher than the 40 bps guided last quarter, continuing into Q3 and Q4.; Auto sector slowdown continues to impact manufacturing — Management noted continued softness in the auto segment, which is affecting the broader manufacturing vertical.; Potential layoffs from restructuring not fully quantified — When pressed by an analyst, management acknowledged some employee reductions due to skill-location mismatch, but did not provide specific numbers, raising transparency concerns.; U.S. revenue mix declined YoY despite overall growth — U.S. revenue as a percentage of total revenue declined 2% YoY, though management attributed it to CTG revenue mix shift; underlying demand uncertainty remains..

Promise ledger

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

Tech Mahindra reported Q2 FY26 revenue of INR 13,995 crore, up 5.1% YoY, with PAT of INR 1,194 crore (+28.2% YoY). EBIT margin expanded 108bps to 12.1%, marking the eighth consecutive quarter of improvement. Growth was broad-based across manufacturing, BFSI, and retail, while communications remained soft. Net new deal TCV reached $816 million, up 57% LTM, and the $20M+ client bucket surpassed $1 billion in revenue. Management highlighted steady progress toward the FY27 margin target of 15%, driven by fixed-price productivity and SG&A optimization. AI investments, including the TechMRI platform and participation in India's AI Mission, are positioning the company for future growth. However, macro uncertainty and a muted discretionary spending environment remain headwinds. The second half is expected to be stronger than the first, aided by deal conversions and operational rigor.

Guidance read

Second half of FY26 expected to be better than first half: Management expects improved performance in H2 driven by operational efficiencies and improved demand visibility, despite seasonal furloughs in Q3. EBIT margin target of 15% by FY27 remains intact: Management reiterated commitment to reaching 15% EBIT margin by FY27, with continued margin expansion each quarter. Net new deal TCV expected to approach $1 billion: Management aims to increase quarterly net new deal TCV closer to $1 billion, up from current $816 million, driven by a rich pipeline. Capital allocation policy: return 85%+ of free cash flow to shareholders: Board recommended dividend of INR 15 per share; committed to returning at least 85% of free cash flow to shareholders.

Risk read

Key risks include Macro uncertainty and muted discretionary spending — Management noted that the macro environment remains slow, with no dramatic growth expected next year, which could impact revenue growth.; H1B visa regulation changes — Under 1% of global workforce on H1B visas; potential regulatory changes could increase costs or limit talent availability, though management considers it manageable.; Client concentration and ramp-down risk — A semiconductor client significantly scaled down operations last quarter, impacting revenue; similar events could recur in the $20M+ client bucket.; Communications vertical weakness in Europe — European telecom business faced localized challenges, causing a decline in the communications vertical; recovery expected but uncertain..

Promise ledger

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