HCLTech vs Techm Q3 FY26

HCLTech delivered a standout Q3 FY26 with revenue of INR 33,872 crore, up 13.3% YoY, crossing a $15 billion annualized revenue milestone. Services revenue grew 5% YoY in constant currency, led by Engineering & R&D Services (10.8% YoY) and HCLSoftware (28.1% QoQ). EBIT margin at 18.6% (excl. labor code impact) improved 111 bps QoQ. Net income was INR 4,795 crore. Management raised full-year services guidance to 4.7%-5.25% CC and overall guidance to 4%-4.5% CC. Key growth drivers include advanced AI revenue of $148 million (up 20% QoQ), strong bookings of $3 billion, and a mega $475 million AI-led deal. Risks include persistent softness in discretionary spending and potential impact from U.S. tariff policies, though management remains confident in capturing emerging AI-related spend.

Guidance read

FY26 Services Revenue Growth Guidance Raised to 4.7%-5.25% CC: Full-year services constant currency growth guidance raised to 4.7%-5.25% from previous range, reflecting strong Q3 performance and bookings. FY26 Overall Revenue Growth Guidance Raised to 4%-4.5% CC: Company-level constant currency growth guidance raised to 4%-4.5% for FY26. FY26 EBIT Margin Guidance Maintained at 17%-18%: Full-year EBIT margin guidance remains at 17%-18%, inclusive of restructuring costs but excluding one-time labor code impact. Ongoing Labor Code Cost Impact Minimal at 10-20 bps: Management expects minimal ongoing costs from new labor code, estimated at 10-20 basis points impact on margins.

Risk read

Key risks include Persistent Softness in Discretionary Spending — Traditional discretionary spending remains soft, and management is not expecting a rebound to pre-COVID levels, focusing instead on emerging AI-related spend.; U.S. Tariff and Geopolitical Uncertainty — Potential impact from U.S. tariff threats (e.g., 500% tariff) and geopolitical tensions could affect the services sector. Management declined to comment, indicating uncertainty.; Life Sciences & Healthcare Vertical Weakness — Life Sciences and healthcare vertical continues to show weakness due to U.S. healthcare sector pressure, with management expecting stabilization in a couple of quarters.; GCC Expansion Impacting Outsourcing — Rise of Global Capability Centers (GCCs) in India may structurally change outsourcing opportunities, though management sees it as a net opportunity..

Promise ledger

Of 4 tracked promises, management 0 met, 0 close, 4 missed.

Tech Mahindra delivered a strong Q3 FY26 with revenue of INR 14,393 crore, up 8.3% YoY, and operating margin expanding 290 bps YoY to 13.1%. Growth was broad-based across comms, manufacturing, retail, and healthcare, with Europe leading geographically at 11.2% YoY. Deal bookings hit a five-year high at $1.096 billion, including a $500M+ European telco win. Management reiterated its FY27 target of growing above peer average and reaching 15% EBIT margin. Key risks include BFSI volatility from furloughs and productivity pass-through, and potential margin headwinds from wage hikes under the new labor code.

Guidance read

FY27 revenue growth above peer average: Management expects to grow higher than the peer average by the end of FY27, supported by strong deal pipeline and large client momentum. FY27 EBIT margin target of 15%: Company remains on track to achieve 15% EBIT margin by FY27, driven by continued operational improvements and gross margin expansion. Large deal ramp in H1 FY27: The $500M+ European telco deal will start ramping in the first half of FY27, contributing to revenue growth.

Risk read

Key risks include BFSI volatility from furloughs and productivity pass-through — BFSI revenue declined 0.8% YoY due to higher-than-normal furloughs and annual productivity gains in a large contract, which may persist.; Wage hike impact on margins — Wage hike timing and quantum are undecided due to new labor code implications; could pressure margins when implemented.; Seasonal normalization in European auto — Manufacturing growth was partly boosted by one-time deliveries in European auto, which will normalize next quarter, creating a headwind..

Promise ledger

Of 3 tracked promises, management 0 met, 1 close, 2 missed.