HCL Technologies delivered exceptional performance in the December quarter, reporting total contract value (TCV) bookings of $3 billion driven by strong AI-led demand and large deal wins. The company demonstrated resilience in a selective spending environment, with management highlighting healthy pipeline growth and emerging AI services as key growth drivers.

Strong AI Revenue Growth Powers Performance

The company's advanced AI revenue reached significant milestones during the quarter, showcasing the shift in client spending patterns toward AI-enabling technologies.

According to CEO and MD C Vijayakumar, discretionary technology spending has shifted away from traditional areas toward AI-enabling and AI-adjacent services. The advanced AI revenues include specialized services such as AI data center build-outs, custom silicon for edge inferencing, robotics, and physical AI, rather than embedded AI used across routine service delivery.

Margins Remain Stable Despite Multiple Headwinds

HCL Tech maintained steady profitability metrics while navigating various cost pressures and currency fluctuations during the quarter.

CFO Shiv Walia noted that the quarter benefited from seasonally strong performance in the software business, which posted nearly 35% EBIT margins despite representing only about 10% of overall revenue. The company absorbed a one-time charge of $109 million related to new labor code implementation, with management expecting the annual margin impact to be limited to 10-20 basis points going forward.

Vertical Performance Shows Broad-Based Growth

The company demonstrated strong performance across multiple industry verticals, with technology services leading growth momentum.

Technology services grew 14% year-on-year, driven by demand for custom silicon and AI inferencing solutions across retail, industrial, and manufacturing sectors. BFSI remained one of the fastest-growing verticals with 8% year-on-year growth, while ER&D services posted over 3% sequential growth and double-digit annual growth.

Strategic Workforce Management and Future Outlook

Employee headcount rose by over 6,000 year-on-year while remaining flat sequentially, reflecting the company's strategic approach to workforce planning. Management indicated that future hiring will closely track revenue growth, with AI-led productivity allowing the company to deliver 4-5% growth without proportional workforce increases.

Vijayakumar emphasized the company's selective approach to pricing, stating that HCL Tech remains prepared to walk away from deals that do not meet profitability thresholds. Management expects margins to move back toward the 18-19% range in FY27 once one-time restructuring and labor-related costs subside, with restructuring costs for FY26 expected to be around 50 basis points for the full year.

Tata Consultancy Services and HCL Technologies delivered robust Q3 FY26 performance, demonstrating strong revenue growth and significant expansion in AI services. Both IT giants showcased healthy deal wins and strategic partnerships, though analyst recommendations remain mixed on their near-term investment potential. The companies' focus on AI-driven transformation and digital services continues to drive growth momentum across key markets.

TCS currently trades at ₹3,275 per share with a market capitalization of ₹11,76,927.69 crores, gaining 1.21% from the previous close of ₹3,235.70. Meanwhile, HCL Technologies trades at ₹1,691 per share with a market cap of ₹4,53,168.50 crores, rising 1.37% from ₹1,668.10.

Q3 FY26 Financial Performance

Both companies reported strong quarterly results, with HCL Technologies demonstrating superior revenue growth compared to TCS.

TCS secured total deal bookings of $9.3 billion during the quarter, including several large deals across markets with a mega deal in North America. Despite a 9% year-on-year decline in deal bookings, momentum remained strong supported by BFSI-led demand and AI-driven transformation opportunities.

HCL Technologies demonstrated exceptional deal activity with net new deals totaling $3.006 billion and annual contract value bookings reaching a four-year high, underlining the company's strong market position.

AI Services Expansion

Both companies showcased significant AI revenue growth, positioning themselves as leaders in the AI transformation space.

TCS reported strong traction in AI services with annualized AI revenue reaching $1.5 billion and healthy 16.3% quarter-on-quarter growth. HCL Technologies' Net Advanced AI remained a key growth driver, with AI-led revenues of $146 million representing roughly 4% of total revenue and registering strong 19.9% sequential growth fueled by rising adoption of Agentic AI, Physical AI, and AI Factory implementations.

Strategic AI Partnerships

TCS has built a comprehensive AI ecosystem through strategic partnerships with hyperscalers including AWS, Google Cloud, and Microsoft, along with enterprise platforms such as SAP, Oracle, Salesforce, and ServiceNow. The company collaborates with NVIDIA, OpenAI, Anthropic, Siemens, Honeywell, and AI-native partnerships like Kore.ai, Vianai, Windsurf, CURSOR, enabling delivery of scalable, industry-focused AI solutions.

HCL Technologies continues strengthening its AI ecosystem through strategic partnerships with global technology leaders. The company has deepened collaboration with NVIDIA in Physical AI and Robotics, including launching a Physical AI Innovation Lab. HCL Technologies achieved Microsoft Copilot Specialization and recognition as a "Frontier Firm" by Microsoft, while partnerships with SAP, AWS, and Strategy Inc focus on advancing AI-driven industry solutions.

Brokerage Recommendations

Analyst views remain divided on both stocks, reflecting different perspectives on valuations and growth prospects.

TCS Brokerage Views:

HCL Technologies Brokerage Views:

The mixed recommendations reflect varying views on valuations and near-term growth prospects, with some analysts remaining optimistic about AI-driven growth while others express caution about current valuations.