Revenue: Seasonality and deal expansions drive growth
YES Securities estimates third-quarter revenue at around Rs 33,400 crore, implying growth of 11.8% year-on-year and 4.6% quarter-on-quarter. In constant currency terms, growth is expected to be 3% quarter-over-quarter, supported by seasonal strength in software products and emergency and development services.Axis Securities expects sequential growth of 4.5%, mainly driven by seasonal upturn in ER&D and software activities. While Kotak Equities is more conservative on services sector growth, the company expects 1% quarter-on-quarter growth in services, with product seasonality contributing as much as 180 basis points to overall revenue growth.
The number of large deals won in recent quarters is expected to increase visibility of growth, even as discretionary spending remains selective across sectors.
Margins: A sharp sequential recovery is expected
Margins will likely be the main positive surprise for the quarter. Axis Securities expects EBIT margin growth of 187 basis points quarter-on-quarter, driven by favorable currency movements, operational efficiencies and seasonal benefits, partially offset by wage increases.
YES Securities estimates that EBITDA margins will increase by approximately 145 basis points to 22.1%, with EBITDA rising 11.9% quarter-on-quarter. Kotak Equities expects underlying EBIT margin improvement of 100 basis points quarter-on-quarter to 18.5%, even after taking into account the impact of restructuring costs of 70 basis points. Brokers are broadly convinced that the December quarter could mark a turning point in the margin trajectory and pave the way for a gradual recovery towards the 18-19% band over the medium term.
Profit: modest growth despite operating leverage
Despite strong margin improvement, PAT growth is expected to remain modest on an annual basis. YES Securities expects a PAT of around Rs 4,600 crore, implying flat YoY growth, although sequential growth is estimated at almost 9%.
The relatively moderate annual growth reflects the impact of restructuring costs, wage increases and investments, even as operating leverage improves. The expectation is that the successive improvements in profitability will be stronger than the annual figures suggest.
Deal wins and guidance in focus
Brokers expect healthy deal TCV of around $2.5 billion this quarter. Kotak Equities expects HCL Tech to lower its fiscal 2026 revenue growth expectations to 3.5-4.5% (from 3-5% earlier), while service revenue growth expectations would be revised upwards to 4.5-5%. The company is expected to maintain its EBIT margin of 17-18% for the full year.
Management commentary on deal pipeline strength, conversion timelines and profitability of cost reduction and supplier consolidation deals will be closely watched.
GenAI, ER&D and discretionary spending
Investors’ focus is likely to remain on GenAI’s adoption trends, its monetization opportunities, and AI’s potential deflationary impact on technology spending. Axis Securities highlighted GenAI adoption as a key monitorable factor, in addition to ER&D performance and guidance commentary.
Kotak Equities expects management to provide more clarity on recent investments in ER&D services and products, and how these bets could support growth acceleration to high single digits over the medium term.
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