Tech Mahindra signals an IT revival. These 2 rivals trade at up to a 52% discount

Investor optimism for this sector has shown signs of emerging, with leading IT stocks rising 3% to 7% this week. However, the Nifty IT index has declined nearly 18.1% this calendar year as compared to a 12.8% decline in the broader Nifty-50 index. FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now Q2FY27 Revenue Breakdown: Communications Vertical Powers Tech Mahindra Ahead of HCL Tech Tech Mahindra reported a 2.4% q-o-q growth in constant currency terms in consolidated revenues to Rs 16,180.2 crore in the quarter.

The company benefited from strong growth in certain verticals – for instance, communication vertical accounted for 33.5% of its consolidated revenues in the September 2026 quarter, a growth of 6% q-o-q. Also, BFSI accounted for 16.4% in the quarter, a growth of 0.4% q-o-q. For perspective, Tech Mahindra reported a 2.6% q-o-q growth in constant currency terms in its consolidated revenues in the June 2026 quarter.

Growth in revenues reported by Tech Mahindra and HCL Tech in September 2026 quarter (constant currency) IT CompanyQ-o-Q growth (%) in September 2026 quarterTech Mahindra2.4%HCL Tech2.3% Source – Company results and investor presentation HCL Tech’s Q2 Revenue Mix: ER&D Shines at 4.1% Growth While Software Drags Earlier, HCL Tech highlighted its consolidated revenues grew by 2.3% q-o-q in constant currency to Rs 35,620 crore.

In its key IT and business services division, HCL Tech has highlighted revenues grew 2.7% q-o-q in constant currency in the quarter under review. In certain verticals, the company’s performance was much better – for instance, the key financial services vertical accounted for 22.4% of revenues in the September 2026 quarter as compared to 22.1% in the first quarter of FY27. Also, the company’s engineering and R&D services division grew 4.1% q-o-q on a constant currency basis in the second quarter of FY27.

However, in its smaller HCL Software division, its revenues declined 5.8% q-o-q in constant currency in the quarter under review. HCL Software includes revenue recognized from perpetual licenses and compliance revenue along with subscription revenue, support revenue (including that attributable to perpetual licenses) For perspective, in its key IT and business services division, HCL Tech reported flat sequential revenue in constant currency terms in the June 2026 quarter.

Margin Expansion & Headcount: How Tech Mahindra and HCL Tech Boosted Q2 Profits Tech Mahindra had 152,206 employees at the end of the September 2026 quarter as compared to 146,760 employees at the end of the June 2026 quarter. As a result, its key employee costs were 50.9% of consolidated revenue from operations in the September 2026 quarter as against 50.1% in the June 2026 quarter. Improved revenue growth q-o-q on a constant currency basis in the September 2026 quarter helped Tech Mahindra offset higher employee costs.

As a result, Tech Mahindra’s core operating profit margin grew by 30 basis points q-o-q to 17.8% in the quarter under review. 4 Sectors That Could Feel it First Its net profit also grew 8.3% q-o-q to Rs 1,609.7 crore in the quarter under review. The company has announced a bonus issue in the ratio of 1:1 and while shareholders will get additional shares in proportion to existing shares they own, it does not change the basic operating environment of the company.

Tech Mahindra, like other IT service companies, is attempting to scale up growth over the next few quarters amidst stiff global competition from AI players. Meanwhile, HCL Tech had 230,339 employees at the end of the September 2026 quarter as compared to 223,889 employees in the June 2026 quarter. Nevertheless, HCL Tech has kept the key cost under check – employee expenses were 55.7% of its revenue from operations in the September 2026 quarter as compared to 56.9% in the June 2026 quarter.

Improved growth in its key IT and business services division coupled with a tight check on employee costs helped HCL Tech’s core operating profit margin improve 100 basis points q-o-q to 20.9% in the second quarter of FY27. HCL Tech’s consolidated net profit also grew 10.9% q-o-q to Rs 5,132 crore in the second quarter of FY27. The AI Revenue Test: HCL Tech Clocks $219M in Advanced AI While TechM Keeps Numbers Under Wraps Tech Mahindra did not provide specific revenues from its AI business in the quarter.

The company highlighted several AI projects won during the quarter that it is currently implementing on a global scale. Meanwhile, HCL Tech’s Advanced AI revenues were $ 219 million (nearly Rs 2,080 crore) in the second quarter of FY27, a strong growth of 28.4% q-o-q on a constant currency basis. Why Tighter US H-1B Visa Norms Haven’t Slowed Americas Revenue Growth Yet Investors have been monitoring with concern the Trump administration's stricter scrutiny of H-1B work visas required by Indian software professionals to execute onshore projects and secure new US business.

Key operating parameters indicate no visible impact yet from US H-1B visa restrictions on Indian IT services companies. Tech Mahindra highlighted its IT headcount offshore was 76.4% in the September 2026 quarter as compared to 77.5% in the June 2026 quarter. Also, the company has highlighted 48.5% of its consolidated revenues from operations were from Americas in the September 2026 quarter a growth of 1.9% q-o-q.

Meanwhile, HCL Tech has highlighted its revenues from USA accounted for 56.1% of its consolidated revenues from operations in second quarter of FY27, a growth of 3.5% y-o-y on a constant currency basis. Order Book Showdown: HCL Tech’s TCV Surges 35.4% to $3.25B as Tech Mahindra Slips HCL Tech has raced ahead of Tech Mahindra in TCV (new deal wins) in the quarter under review. Tech Mahindra’s TCV (new deal wins) were $ 1.02 billion in the September 2026 quarter as compared to $ 1.07 billion in the June 2026 quarter, a decline of 4.7% q-o-q.

Earlier, HCL Tech’s TCV was $ 3.25 billion in the September 2026 quarter as compared to $2.4 billion in the June 2026 quarter, a healthy growth of 35.4% q-o-q. Investors on Dalal Street will be keeping a close eye on the new deal wins getting converted into revenues for both the IT companies, going forward. FY27 Revenue Guidance: Why HCL Tech’s Trimmed Upper-Band Forecast Spooked Dalal Street Tech Mahindra has not provided a specific growth forecast for FY27.

Earlier, HCL Tech, while declaring its results for the second quarter of FY27, had raised the lower end of its growth forecast – it expects the key Services revenue to grow 3% to 4% y-o-y on a constant currency basis during FY27. However, it has cut the upper end of its growth forecast for Services on a constant currency basis during FY27. HCL Tech while declaring its June 2026 quarter results had kept its growth forecast constant – it expected the key Services revenue to grow 1.5% to 4.5% y-o-y on a constant currency basis during FY27.

6% to Rs 1,648. Here’s a look at the valuation of key IT services companies. Valuations of IT services companies IT CompanyConsolidated P/ETech Mahindra30.4HCL Tech 19.4Infosys14.4 Source – Screener.in Tech Mahindra trades at a consolidated P/E of 30.4. Over the past 5 years, the stock has traded at a P/E between 17 and 65.6. HCL Tech trades at a P/E of 19.4. Over the past 5 years, the stock has traded at a P/E between 17.6 and 33.

HCL Tech’s growth forecast did broadly disappoint investors on Dalal Street. The IT services sector is poised for a pick-up in revenues, going forward, and investors could put Infosys and HCL Tech, which trade at a discount of 36% to 52% to Tech Mahindra, on their watch list of stocks for 2026. Disclaimer Amriteshwar Mathur is a financial journalist with over 20 years of experience. The writer and his family have no shareholding in any of the stocks mentioned in the article.

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