HCL Tech Rattles Dalal Street, Outshines Infosys' Sluggish Growth

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AuthorAarav Shah|Published at:
HCL Tech Rattles Dalal Street, Outshines Infosys' Sluggish Growth
Overview

HCL Technologies reported robust 4.2% revenue growth in Q3FY26, significantly outpacing a disappointing 0.6% rise from larger rival Infosys. While Infosys saw margin pressure and flat stock movement, HCL Tech's software division and improved operating margins signaled strength, though both IT giants faced one-time impacts affecting net profit.

IT Sector Divergence: HCL Tech Surges Amidst Infosys Slowdown

Dalal Street's attention was divided as IT giants HCL Technologies and Infosys released their December 2025 quarter results. HCL Tech posted a strong 4.2% quarter-on-quarter revenue growth on a constant currency basis, reaching ₹33,872 crore. This performance sharply contrasted with Infosys, which reported a mere 0.6% revenue growth, totaling ₹45,479 crore, disappointing investors looking for signs of a market recovery.

Software Strength Bolsters HCL Tech

A key driver for HCL Tech's impressive revenue jump was its HCL Software division, which saw a remarkable 28.1% q-o-q constant currency growth. This segment, including subscriptions and SaaS, now contributes 11.2% to HCL Tech's revenue, up from 9.1% in the prior quarter. Infosys, meanwhile, experienced sluggish growth across verticals like energy and hi-tech, though its financial services segment showed marginal improvement.

Margin Dynamics and Net Profit

Operating margins painted a divergent picture. Infosys's core operating profit margin dipped 30 basis points to 23.4%, largely due to increased employee expenses which rose to 53% of revenues. A one-time labor code impact of ₹1,289 crore also contributed to its net profit falling nearly 9.6% q-o-q to ₹6,666 crore. HCL Tech, conversely, saw its operating margin grow 120 basis points to 21.7%. Despite employee costs at 55.7% of revenue, a lower one-time labor code impact of ₹956 crore resulted in a 3.6% q-o-q net profit drop to ₹4,082 crore.

Deal Wins and Talent Pool

Infosys secured new deal wins (TCV) worth $4.8 billion in the quarter, a significant increase from $3.1 billion previously. HCL Tech's TCV stood at $3 billion, up 17% sequentially. The Street will closely watch how these translate into future revenues. In terms of workforce, Infosys added 4,864 professionals, bringing its total to 319,364, while HCL Tech's headcount saw a marginal decrease to 226,379.

AI Traction and Future Outlook

HCL Tech reported $146 million in AI-related revenues, marking a 19.9% q-o-q increase. Infosys did not disclose specific AI revenue figures. Looking ahead, both companies revised their FY26 guidance upwards slightly. Infosys now projects 3%-3.5% revenue growth (vs. 2-3%), and HCL Tech anticipates 4.75%-5.25% growth (vs. 4-5%). Both stocks traded flat post-results.

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