TCS vs HCLTech Q2 FY26

TC

TCS

Q2 FY26 · Information Technology

TCS delivered a solid Q2 FY26 with revenue of INR 65,799 crore (+2.4% YoY, +0.8% CC QoQ) and operating margin of 25.2% (+70bps QoQ). Growth was broad-based across verticals and geographies, led by India and emerging markets. Total contract value (TCV) reached $10 billion (+16% YoY), including a mega deal with Tryg Insurance. Management guided FY26 international revenue growth to be better than last year's ~70bps CC. The company announced a major AI strategy pivot, including a subsidiary for a 1 GW sovereign AI data center (phased over 5-7 years, ~$6.5B total) and the acquisition of ListEngage. Key risk: lingering macro uncertainty and client discretionary budget tightness could temper growth momentum.

Guidance read

FY26 international revenue growth better than FY25: Management expects constant currency international revenue growth for FY26 to exceed the ~70bps achieved in FY25. Operating margin aspirational band of 26%-28%: CFO reiterated the goal to return to the aspirational margin band of 26%-28%, with continued improvement expected. AI data center subsidiary with 1 GW capacity over 5-7 years: Board approved creation of a subsidiary to build a sovereign AI data center in India, with capacity up to 1 GW, phased over 5-7 years at ~$1B per 150 MW. Continued workforce release of ~2% mid-senior level: CHRO indicated that the planned release of ~2% of mid-to-senior workforce with skill mismatch is halfway done; further releases may continue.

Risk read

Key risks include Macro uncertainty and discretionary budget tightness — Lingering economic uncertainties keep clients cautious on discretionary spending, which could slow revenue growth.; Cybersecurity incidents at clients causing project delays — Recent cyber attacks on TCS clients led to project start delays, though TCS systems were not compromised.; AI data center investment risk and low ROE — The capital-intensive data center business will have lower ROE than TCS's historical 50%+, though management expects overall ROE to remain benchmark.; Potential deflation from AI productivity gains — AI-driven productivity improvements could reduce revenue per project, though management expects scope expansion to offset..

Promise ledger

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

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.