HCLTech Share Price Rises After Q2 Results: 4 Key Reasons

HCL Technologies shares jumped over 8% after the company reported a 21.2% increase in net profit to ₹5,132 crore in Q2 FY27. Revenue grew 11.5% to ₹35,620 crore, while operating margins improved to 18.2%.

The results come at a time when Indian IT companies are facing concerns about weak global demand and AI replacing traditional IT jobs. However, HCLTech reported $3.26 billion in new orders, 78% growth in AI revenue and an improved annual revenue outlook.

So, is HCLTech's share price rally supported by stronger business performance, or are investors getting too optimistic?

HCLTech Q2 FY27 Results: Key Highlights

HCLTech delivered better-than-expected profits in the September quarter. While revenue increased 11.5% year-on-year, profit grew faster at 21.2%, indicating that the company managed its costs better and improved profitability.

Here is how the company performed.

Source: HCLTech Q2 FY27 Investor Release.

The company also exceeded profit expectations. Analysts expected approximately ₹4,856 crore in profit, but HCLTech delivered ₹5,132 crore, around 5.7% higher than estimates. However, revenue was largely in line with expectations, suggesting that better profitability was one of the main reasons behind the positive market reaction.

Why Is HCLTech Share Price Rising?

HCLTech's share price rally is supported by four developments: higher profitability, record deal wins, growing AI revenue and improved revenue guidance.

1. HCLTech Is Making More Profit From Its Revenue

HCLTech's operating margin increased from approximately 16.9% in the previous quarter to 18.2% in Q2 FY27. In simple terms, the company is now earning ₹18.20 in operating profit for every ₹100 of revenue, compared with ₹16.90 earlier.

This improvement matters because HCLTech's revenue increased only 3% from the previous quarter, while net profit grew approximately 11%. It suggests that the company is managing expenses better and delivering projects more efficiently.

However, the company also incurred restructuring costs during the quarter. Investors should watch whether HCLTech can maintain these higher margins as employee salaries and spending on new technologies increase.

2. HCLTech Won $3.26 Billion in New Deals

HCLTech secured $3.26 billion in new orders during the quarter, approximately 27% higher than a year ago. This included a major $1.14 billion contract from Mercedes-Benz, which accounted for around 35% of total quarterly orders.

Large contracts are important because they provide future business visibility. However, the entire contract value does not immediately become revenue. Companies earn revenue gradually as they complete the work.

For example, the Mercedes-Benz contract is expected to start contributing meaningfully from Q1 FY28. Therefore, HCLTech's strong order bookings are encouraging, but investors will need to see how quickly these contracts turn into actual revenue.

3. AI Revenue Is Growing 78%, But There Is a Catch

One of the biggest highlights was HCLTech's advanced AI business, which generated $219 million in quarterly revenue, growing 78% year-on-year. AI is now contributing around 6% of the company's overall revenue.

This is particularly interesting because AI has been considered a threat to Indian IT companies. Businesses can now use AI for coding, software testing and customer support, potentially reducing their dependence on traditional IT outsourcing.

However, HCLTech is also earning revenue by helping businesses use AI. For example, when a bank wants to introduce AI-powered customer support, it still needs help connecting that system with its existing technology, protecting customer data and managing operations.

HCLTech is expanding in these areas and has also partnered with Anthropic to help businesses adopt AI solutions.

The opportunity is promising, but AI still contributes only around 6% of HCLTech's revenue. Therefore, even though AI revenue is growing rapidly, it is not yet large enough to transform the company's overall growth. Investors should watch whether AI becomes a bigger revenue contributor over the next few years.

4. HCLTech Raised Its Revenue Growth Outlook

HCLTech also improved its revenue growth guidance for FY27. The company now expects revenue to grow between 2.5% and 4% in constant currency, compared with its earlier expectation of 1% to 4%.

This suggests that management has become more confident about the company's performance. However, the upper end of the forecast remains unchanged at 4%, meaning HCLTech is not expecting a major jump in growth.

The company also maintained its operating margin guidance at 17.5% to 18.5%. This indicates that management expects profitability to remain relatively stable despite continued investments and industry challenges.

What Is the Biggest Concern for HCLTech?

Despite strong profits and new orders, HCLTech's underlying revenue growth remains slow. While reported revenue increased 11.5% in rupee terms, revenue growth after removing currency fluctuations was only 2.6%.

This means that the company's actual business growth is much lower than the headline revenue number suggests. AI revenue is growing quickly, but most of HCLTech's business still depends on traditional IT services, where demand remains relatively weak.

Another concern is valuation. Some brokerages have highlighted that HCLTech trades at a premium compared with competitors such as TCS and Infosys. If the company cannot improve its overall revenue growth, investors may find it difficult to justify paying that premium.

The biggest challenge for HCLTech is therefore not winning new deals or improving margins. It is converting those deals into faster revenue growth while protecting profitability.

What Should HCLTech Investors Watch Next?

There are four important developments investors should monitor following the results.

• Revenue growth: HCLTech's underlying revenue grew only 2.6% year-on-year in constant currency. A faster growth rate would indicate improving demand for its services.
• Large deal execution: The company won $3.26 billion in new orders. Investors should watch how quickly contracts such as Mercedes-Benz begin contributing to revenue.
• AI business growth: AI revenue increased 78%, but contributes only around 6% of total revenue. Its future contribution will be important for HCLTech's growth.
• Profit margins: Operating margins improved to 18.2%. Maintaining these levels despite higher employee costs and technology investments will support future earnings.

Author's Take

HCLTech's Q2 results are encouraging because the company is earning higher profits, winning large contracts and expanding its AI business. The results also show that AI may not only be a threat to Indian IT companies but could create new business opportunities for them.

However, the company's underlying revenue growth of just 2.6% shows that the broader business has not yet entered a strong growth phase. Large orders will take time to generate revenue, while AI remains a relatively small part of the overall business.

In my view, HCLTech's share price rally is supported by improving profitability and stronger future business visibility, but the company still needs to prove that these improvements can lead to faster revenue growth. For long-term investors, the real test will be whether HCLTech can turn its record orders and growing AI business into consistent revenue and profit growth over the coming quarters.