HCL Technologies has delivered strong third-quarter results for FY26, with management expressing confidence about the company's prospects for FY27 despite anticipated global volatility. CEO and MD C Vijayakumar described the performance as "very strong across all parameters," marking the second consecutive quarter of robust results.

Strong Financial Performance in Q3FY26

The company reported solid financial metrics for the October-December quarter, demonstrating consistent growth momentum.

Robust Order Book Drives Future Confidence

Vijayakumar highlighted that the company's strong booking performance provides a solid foundation for future growth. The management noted that bookings in Q2 and Q3 were nearly 30% higher than the same period last year, creating positive momentum for upcoming quarters.

This strong order book performance is expected to translate into meaningful revenue uptick in Q4 of the current financial year as well as Q1 of the next financial year. The CEO emphasized that the strength of the order book, pipeline visibility, and overall business momentum support expectations of positive outcomes in FY27.

Restructuring Exercise Nearing Completion

CFO Shiv Walia provided updates on the company's ongoing restructuring initiative, which has been a key focus area. The restructuring exercise primarily addressed skill and location mismatches identified in Q1, along with underperformance in some acquisitions, particularly in the automotive segment across Western geographies.

The management expects to complete this restructuring exercise by the end of FY26, allowing the company to start FY27 with a clean slate.

Margin Recovery Outlook

With restructuring costs expected to be contained, HCLTech management remains optimistic about margin recovery. Vijayakumar noted that excluding restructuring costs, the company is only 10-11 basis points away from its target margin range this quarter. The management expects margins to move back towards the 18-19% band in FY27 once restructuring activities conclude.

Regarding the new labor code impact, Walia indicated that beyond a one-time charge, the recurring impact would be minimal at 10-20 basis points going forward.

Advanced AI Business Shows Strong Momentum

The company's advanced AI business continues to demonstrate robust growth, currently contributing ₹147-148 million per quarter and growing at approximately 20% quarterly pace. This represents about 4% of overall consolidated revenue.

Vijayakumar explained that advanced AI encompasses infrastructure enablement work, silicon design for edge inferencing chips, agentic solutions, and proprietary AI intellectual property. The management expects this momentum to continue for several quarters due to strong fundamental demand drivers.

Acquisition Strategy and Future Outlook

The company expects recent acquisitions including Jaspersoft and HPE to contribute approximately 1.5% growth to the overall company in FY27, assuming closure by March or early April. However, management indicated they are not planning large-scale acquisitions, instead focusing on capability-led acquisitions or specific geographic expansion opportunities.

While acknowledging the multiple global uncertainties that make FY27 volatile, Vijayakumar emphasized that leading indicators remain encouraging, with specific guidance to be shared after the April meetings.

HCL Technologies delivered a strong third-quarter performance for FY26, with shares trading 0.11% higher at ₹1,669.50 on Tuesday afternoon after recovering from an intraday low of ₹1,626. The IT services major's better-than-expected results and upgraded revenue guidance attracted buying interest from institutional investors despite mixed analyst recommendations.

Financial Performance Highlights

The company reported impressive financial metrics for Q3FY26, demonstrating robust growth across key parameters:

The reported profit after tax decline was attributed to a one-time provision of ₹956 crore related to new labour codes. Excluding this exceptional item, the adjusted PAT showed healthy growth of 4.4% year-on-year.

Strategic Partnership and Business Developments

HCL Tech announced a significant multi-year partnership with The Magnum Ice Cream Company, the world's largest ice cream company. Under this collaboration, HCL Technologies will design, build and manage future-ready IT infrastructure for the ice cream giant. The company will deploy its AI Force platform to embed artificial intelligence across TMICC's digital infrastructure, enabling a transition from AIOps to a NoOps operating model for fully autonomous IT operations.

Strong Deal Momentum and Revised Guidance

The company demonstrated robust deal momentum with total contract value bookings of $3 billion in the quarter, representing a substantial 43.5% increase year-on-year. A notable highlight was securing a $473 million five-year mega deal with a global retailer, underscoring the growing demand for AI-led transformation services.

Based on this strong performance, management raised the FY26 services revenue growth guidance to 4.75-5.25% from the earlier projection of 4-5%, reflecting confidence in continued business momentum.

Mixed Analyst Recommendations

Despite the strong quarterly performance, analyst opinions remained divided with varying target price recommendations:

Goldman Sachs cited stable-to-improving demand conditions in the IT sector for its target price increase. However, Kotak Institutional Equities maintained caution, arguing that the stock trades at a premium to peers at 23 times FY27 estimated earnings.

Dividend Declaration

The board declared an interim dividend of ₹12 per share, marking the company's 92nd consecutive quarter of dividend payout. This consistent dividend track record demonstrates the company's commitment to returning value to shareholders while maintaining financial discipline.