HCL Tech vs TCS: Which IT stock to buy today after Q1 results 2025? EXPLAINED
Q1 Results
HCL Technologies announced on Monday, July 14, a 9.7% decline in its consolidated net profit for the June quarter, impacted by increased expenses and the one-time effect of a client's bankruptcy. The company reported a net profit (attributable to the owners of the firm) of ₹4,257 crore during the same period last year, as stated in a regulatory filing. For the quarter in review, revenue from operations increased by 8.1%, reaching ₹30,349 crore, compared to ₹28,057 crore in Q1FY25.
The company reported that its operating margin was 16.3%, which fell short of their expectations. Although Q1 has typically been their weakest quarter, the lower-than-expected operating margin was primarily caused by a decrease in utilization due to delays in the ramp-up of a particular program.
HCL Tech share price closed down by 1.04% at ₹1,619.95 per share on the BSE on Monday. The financial results were disclosed following the end of trading hours.
On Thursday, July 10, TCS announced a 6% increase in its net profit for the June quarter, reaching ₹12,760 crore. In the same period last year, the Tata group firm reported a net profit of ₹12,040 crore.
The company's revenue rose by 1.3% to ₹63,437 crore, compared to ₹62,613 crore during the same period last year, although it declined by 3% when measured on a constant currency basis.
According to a company statement, its operating profit margin improved by 0.30 percent quarter-over-quarter, standing at 24.5 percent for the April-June period.
HCL Tech vs TCS Q1 Results: Here's what experts say
According to Mohit Gulati, the CIO and managing partner of ITI Growth Opportunities Fund, in the wake of Q1 FY26 earnings, TCS clearly emerges as the more compelling IT bet, backed by a superior margin profile, robust deal wins, and a steady profit trajectory. While HCL Tech continues to demonstrate long-term potential, near-term headwinds around margins and deal execution warrant a wait-and-watch approach before committing fresh capital.
'That said, both companies have shown remarkable resilience across decades of business cycles — navigating global shocks, tech shifts, and macro volatility — a testament to the enduring strength of India's IT backbone,' added Gulati.
In the same vein, Vinit Bolinjkar, Head of Research at Ventura Securities, considers TCS to be a stronger choice because it managed to maintain its margins, and some of BSNL's orders are expected to come in the next quarter. HCL Tech experienced a notable drop in margins.
In a detailed comparison, Bhavik Joshi, Business Head, INVasset PMS believes both TCS and HCL Technologies delivered solid Q1 FY26 results, but their paths forward differ in key areas. TCS, with its robust margin leadership of 24.5% and industry-best cash conversion, has proven resilience despite the ongoing weakness in global demand. The company's strategic focus on AI and a healthy deal pipeline, with a $9.4 billion order book (+13% YoY), provides a solid foundation for long-term growth, even if near-term visibility remains subdued. For investors seeking stability, consistent margins, and strong cash flow, TCS stands out as the more defensive choice.
On the other hand, HCL Technologies delivered strong revenue growth of 8% YoY, outpacing TCS, fueled by its digital and cloud capabilities. However, the company is facing significant margin pressures with operating margins dropping to 16.3%, primarily due to heavy investments in Generative AI and Go-to-Market strategies. This creates a higher risk-reward scenario for HCL Tech, as it seeks to capitalize on future AI adoption, but the short-term profitability concerns, with net profit declining by 9.7% YoY, warrant attention.
'In summary, TCS presents a safer, margin-driven play with better near-term visibility, while HCL Tech offers higher growth potential but with added volatility due to its aggressive digital and AI investments. For those prioritizing stability and margin leadership, TCS remains the preferred option, but those willing to embrace a bit of risk in exchange for higher growth potential might find HCL Tech appealing,' added Joshi.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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