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.

HCL Technologies delivered impressive Q3 results that significantly outpaced industry peer TCS, showcasing strong deal momentum and revenue growth that led to raised guidance for the fiscal year. The contrasting performance between these IT giants provides valuable insights into the current state of technology sector demand and recovery patterns.

HCL Technologies Posts Strong Quarter with Record Deal Wins

HCL Technologies reported robust 4.2% sequential constant currency revenue growth, substantially aided by its products and platforms business during the seasonally strong December quarter. The company achieved remarkable success in deal acquisitions, with total contract value of new wins surging 43.5% year-on-year to reach a multi-quarter high of $3.00 billion.

Management attributed the strong booking momentum to applications and engineering and R&D services, noting that annual contract value bookings in Q3FY26 reached the highest level in four years. Based on this performance, HCL raised its FY26 constant currency year-on-year services revenue growth guidance to 4.75-5.25% from the previous 4-5%, while overall growth guidance was narrowed to 4-4.5% from 3-5%.

TCS Shows Modest Growth Amid International Market Challenges

TCS presented a more subdued performance with modest 0.8% sequential constant currency revenue growth, driven primarily by its India business while international markets remained under pressure. The company's deal acquisition momentum weakened, with total deal wins falling 9% year-on-year to $9.30 billion.

Despite not providing formal revenue growth guidance, TCS management indicated that based on deal pipeline and gradually improving demand conditions, revenue growth in international markets is expected to be higher in 2026 than in 2025.

Margin Performance and Operational Efficiency

HCL's earnings before interest and tax margin expanded significantly by 120 basis points sequentially to 18.6%, even as services margins slipped 10 basis points to 16.4%. The company maintained its FY26 EBIT margin guidance of 17-18%, which includes restructuring costs but excludes one-time impact from new labour codes.

TCS's EBIT margin excluding one-off items remained flat sequentially at 25.2%, with the company reiterating its aspirational margin band of 26-28%, which management noted would require better revenue growth to achieve.

AI Revenue Momentum Continues for Both Companies

Both technology leaders demonstrated continued traction in artificial intelligence services. HCL's advanced AI revenue rose 19.3% sequentially in constant currency terms to $146.00 million, while TCS's annualized AI constant currency revenue grew 17% to $1.80 billion. TCS management highlighted that clients are transitioning from experimentation phases to scaled AI implementations.

Market Response and Analyst Outlook

Despite strong results, both stocks showed minimal movement following earnings announcements, reflecting investor caution amid unclear evidence of broad-based demand revival. Jefferies India noted that TCS's Q3 results offer limited evidence of growth pickup in international business, estimating TCS will deliver around 5% recurring earnings per share CAGR over FY26-28, compared with an estimated 10% recurring EPS CAGR for HCL.

HCL trades at FY27 estimated price-to-earnings multiple of 23x, representing a slight premium to TCS's 21x multiple. Goldman Sachs characterized the read-across from these results for the broader IT sector as neutral to modestly positive, emphasizing that with demand visibility remaining cloudy through FY26 and FY27, investors will need to be highly selective in their approach.