HCL Technologies Reports Q2 Earnings Growth Amid Valuation Concerns

HCL Technologies shares rose 7% following an upward revision of earnings estimates after the September quarter results. The company reported a 2.3% sequential constant currency revenue growth, falling short of the 2.7% consensus estimate. While services revenue grew, the software business declined by 5.8% due to a lower volume of license renewals.

Management revised the annual revenue growth guidance to a range of 2.5% to 4%, a shift heavily supported by inorganic contributions from recent acquisitions. Organic growth projections remain modest, and the company anticipates potential headwinds in the second half of the fiscal year due to delayed contributions from major contracts and ongoing uncertainty in telecom discretionary spending.

Operating margins expanded to 18.2%, supported by AI-driven revenue and internal efficiency programs. However, upcoming wage hikes are expected to exert downward pressure on margins in the third and fourth quarters. Despite strong deal wins and AI-focused growth, the company currently trades at a premium valuation compared to industry peers, creating potential downside risk if future growth targets are not met.