India’s top IT services firms, Tata Consultancy Services (TCS) and HCLTech, posted their Q1FY26 earnings recently, reflecting contrasting performance across key metrics. While TCS continued to maintain its profit and margin edge, HCL Tech showed stronger revenue growth but saw pressure on profitability.
Here’s a quick comparison across five key areas as other major IT firms like Wipro and Infosys are scheduled to announce their results on July 17 and July 23 respectively.
1. TCS delivers steady profit growth; HCLTech sees earnings drop
TCS reported a net profit of ₹12,760 crore in Q1FY26, marking a 6 per cent rise year-on-year. However, revenue growth was muted at ₹63,437 crore, up just 1.3 per cent.
In contrast, HCLTech posted a much sharper 8.2 per cent YoY growth in revenue at ₹30,349 crore, but net profit declined nearly 10 per cent to ₹3,843 crore due to margin pressure and one-time costs. The results underline how TCS is prioritising margins, while HCLTech is chasing top-line expansion at the cost of profitability.
2. TCS recovery expected in H2FY26; HCLTech sets 3–5 per cent growth target
For the outlook ahead, HCLTech expects its overall revenue to grow between 3.0 per cent and 5.0 per cent year-on-year in constant currency terms. The services segment is also projected to register a similar growth range of 3.0 per cent to 5.0 per cent. Meanwhile, the company has guided for an EBIT margin in the range of 17.0 per cent to 18.0 per cent.
While TCS has not issued formal revenue guidance, analysts at InCred Research project a modest 2.1 per cent rise in revenue to Rs 2.60 lakh crore and a 5.3 per cent jump in net profit to Rs 51,139 crore. The EBIT margin is expected to inch up to 24.9 per cent, aided by improved productivity and cost efficiencies, though the BSNL project may weigh in during the near term. Deal wins in Q1 FY26 stood strong at US $9.4 billion, up 13.3 per cent year-on-year, despite continued delays in decision-making and project starts.
Axis Securities sees green shoots in international markets, with TCS betting big on AI adoption and digital transformation. With improving order flows and tariff clarity, a stronger recovery is expected to take shape in H2FY26.
3. TCS posts 24.5% margin in Q1; HCLTech struggles at 16.3%
TCS delivered an EBIT margin of 24.5 per cent, up 30 basis points sequentially, maintaining its industry-leading profitability.
HCL Tech, however, reported a lower EBIT margin of 16.3 per cent, impacted by wage hikes, GenAI investments, and a client bankruptcy. HCLTech also cut its full-year margin guidance to 17–18 per cent from the earlier 18–19 per cent range.
4. TCS leads in new deal wins; HCLTech offers higher dividend payout
In terms of new deal wins, TCS recorded a total contract value (TCV) of $9.4 billion, including several large deals across verticals.
HCL Tech, meanwhile, reported a total TCV of $1.81 billion in Q1FY26, down 7.5 per cent YoY and 39.5 per cent QoQ.
Both companies announced interim dividends for shareholders. TCS declared a dividend of ₹11 per share, while HCL Tech announced a higher dividend of ₹12 per share. While the yield may appear better in HCL’s case, TCS’s consistency and stable cash flow position offer a more dependable long-term return profile.
5. TCS adds over 6,000 employees; HCLTech sees sequential decline in headcount
TCS added 6,061 employees during the quarter, taking its headcount to 6,13,069. The company also reported attrition at 13.8 per cent, maintaining stability in its workforce.
On the other hand, HCL Tech’s headcount declined by 1,597 employees sequentially. Attrition at HCL stood at 14.8 per cent, slightly higher than TCS.
AI takes centre stage in HCLTech and TCS strategy
Both the companies are heavily focusing on AI. C Vijayakumar, CEO & Managing Director, HCLTech, said, “Our operating margin came at 16.3%, impacted by lower utilization and additional Gen AI and GTM investments. Our AI propositions are resonating well with our clients and have been augmented further by our partnership with Open AI.”
Roshni Nadar Malhotra, Chairperson, HCLTech, said, “AI has become integral to business growth of global enterprises. HCLTech’s capabilities and strategic partnerships ensure our AI-led solutions are practical, comprehensive and significant value creators to our clients. We also remain intensely focused on the ethical deployment of AI and maximizing its positive social impact.”
TCS also noted that services such as AI & Data, Cloud, Cyber Security, and Enterprise Solutions drove growth. Aarthi Subramanian, COO, added, “We are investing across the AI ecosystem including infrastructure, data platform solutions, AI agents and business applications.”
IT sector faces tougher headwinds in Q1FY26: InCred
InCred described the overall commentary from TCS management as “incrementally cautious,” noting that the trend of delayed discretionary spending and scope reductions intensified in Q1FY26 compared to the previous quarter.
The brokerage maintains a cautious view on the broader IT sector, citing weak revenue conversion, delayed client decisions, and subdued enterprise spending amid uncertain demand trends.
Cautious optimism for IT sector amid global uncertainties: Axis securities
Despite HCLTech’s subdued Q1FY26 performance, Axis Securities noted that the company’s strong digital and AI-driven deal pipeline could drive a rebound in the second half of FY26. According to Axis, HCL’s investments in GenAI and go-to-market teams have weighed on margins in the short term. However, the firm highlighted HCLTech’s strategic focus on cognitive infrastructure and partnerships—especially around OpenAI initiatives—as a long-term positive for scaling digital transformation across client platforms.
Axis Securities remains cautiously optimistic about the IT sector at large, flagging risks from a volatile global macro environment and rising cost pressures, but it sees signs of demand stability and improved visibility in discretionary IT spending by FY27. With management guiding 3–5 per cent constant currency revenue growth for FY26, Axis expects operational efficiencies, AI-led solutions, and large deal wins to gradually restore growth momentum for HCL and the broader sector in the coming quarters.
