HCL Tech Surges on Strong Q3 FY26 Earnings, AI Momentum
Overview
HCL Technologies delivered a robust Q3 FY26, driven by strong software and services revenue. The IT major revised its full-year growth forecast upwards and highlighted significant traction in its Advanced AI business, now contributing 4% of revenue. Margin gains were achieved despite restructuring costs, and order inflows remain healthy with a positive outlook.
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HCL Tech Reports Stellar Q3 FY26 Performance
HCL Technologies posted a strong third quarter for fiscal year 2026, marked by accelerated revenue growth, particularly from its software division, bolstered by its services arm. The company's financial results also revealed sequential margin improvements despite significant restructuring expenses. Order inflows remain robust, signaling a healthy pipeline for the future.
Revenue Drivers Shine
The IT giant reported a 4.1% sequential revenue increase (4.2% in Constant Currency) for Q3 FY26. This growth was primarily led by the software business, benefiting from seasonal strength, while services saw a respectable 1.8% sequential rise, largely attributed to Engineering R&D services. Performance across key markets like the US, Europe, India, and the Rest of the World was positive.
Margin Gains Amidst Investments
Despite incurring restructuring expenses related to its AI and go-to-market strategy, HCL Tech managed to improve its operating margin by 111 basis points sequentially. This gain was predominantly driven by HCL Software's positive contribution. Productivity enhancements and foreign exchange gains also aided the margin, though they were partially offset by wage hikes and restructuring costs.
Robust Order Inflows Bolster Outlook
Order inflows reached $3 billion in the quarter, a significant 17% increase sequentially and a substantial 43% year-over-year surge. The company secured a mega deal from a US retailer, with 62% of new orders originating from application development and Engineering R&D services. The quarter also marked the highest Annual Contract Value (ACV) booking in four years, indicating strong future revenue visibility.
AI as a Core Differentiator
HCL Technologies is aggressively positioning Artificial Intelligence as a key differentiator. The company's Advanced AI revenue reached $100 million, representing approximately 4% of its total revenue. With its proprietary AI Force platform, vertical AI solutions, and strategic partnerships, HCL Tech appears well-placed to capitalize on the growing enterprise AI adoption. The company has also raised its full-year revenue growth guidance for services to 4.75-5.25% and overall revenue growth to 4-4.5%.
