TCS vs HCLTech (2026): Margins, AI Revenue, Valuation & Which Is Better?
TCS is currently cheaper on earnings despite having much stronger ROE, ROCE and margins. HCLTech, meanwhile, is growing quarterly profit faster, pays the higher dividend yield and has one of the most explicit AI revenue disclosures among Indian IT companies.
That combination makes this comparison more interesting than their relative size suggests.
TCS is roughly two-and-a-half times HCLTech's market capitalisation and booked $9.5 billion of Q1 total contract value. HCLTech booked $2.407 billion of new deals, its highest-ever Q1 figure, while Advanced AI revenue jumped more than 62% year on year in constant currency.
The unexpected part: TCS is currently the cheaper earnings multiple
TCS trades at approximately 15.9 times trailing earnings, below HCLTech at roughly 18.2 times.
Normally, investors might expect TCS to command the higher multiple because it has the larger business, wider margins and dramatically higher capital-return ratios.
Yet the opposite is currently true.
TCS also trades below Bull Run's current IT-industry P/E of about 22.3x. HCLTech does too.
This suggests that the market is discounting broader concerns around global IT-services spending, AI-driven productivity and the durability of traditional outsourcing economics across both companies.
TCS vs HCLTech: the numbers that matter
| Metric | TCS | HCLTech | Current Edge |
|---|---|---|---|
| Market capitalisation | ₹791,946 Cr | ₹316,875 Cr | TCS |
| P/E | 15.90x | 18.19x | TCS |
| P/B | 7.38x | 4.22x | HCLTech |
| ROE | 48.72% | 22.98% | TCS |
| ROCE | 58.50% | 28.37% | TCS |
| Net profit margin | 18.05% | 12.97% | TCS |
| 5-year sales growth | 10.22% | 11.54% | HCLTech slightly |
| 5-year profit growth | 8.70% | 8.35% | Nearly tied |
| 5-year EPS growth | 9.42% | 8.40% | TCS |
| 5-year free cash flow | ₹210,878 Cr | ₹92,709 Cr | TCS |
| Dividend yield | 2.92% | 4.62% | HCLTech |
| Debt-to-equity | 0.00 | ~0.00 | Both very low |
| Operating cash flow / PAT | 1.06x | 1.20x | HCLTech |
| Promoter holding | 71.77% | 60.81% | Both high |
| Promoter pledge | 0% | 0% | Both |
| FII holding | 9.66% | 15.51% | HCLTech |
| DII holding | 13.34% | 18.95% | HCLTech |
| Bull Run Score | 65.4/100 | 65.8/100 | Effectively tied |
TCS is still in another league on capital efficiency
The largest fundamental gap between TCS and HCLTech is not revenue. It is the return generated on shareholder capital.
TCS has ROE of roughly 48.7% and ROCE of approximately 58.5% in Bull Run's current dataset.
HCLTech's ROE is about 23.0% and ROCE around 28.4%.
HCLTech's figures are healthy. TCS's are exceptional.
This is one reason investors have historically treated TCS as one of India's highest-quality large-cap businesses. The company operates an asset-light model, generates substantial cash and requires relatively little incremental capital to support large contracts.
When a company with those economics also trades on the lower P/E of the pair, the valuation deserves attention.
Q1 FY2027: HCLTech grew profit faster
HCLTech's latest quarterly earnings momentum is stronger than TCS's.
Bull Run's financial fields show HCLTech quarterly sales up approximately 13.94% year on year and profit up about 20.32%.
TCS shows nearly identical quarterly sales growth at approximately 13.93%, but profit growth of only around 4.62%.
Official HCLTech results show Q1 FY2027 revenue of ₹34,579 crore, up 13.9% year on year, while net income increased 20.3% to ₹4,624 crore.
TCS reported $7.624 billion of revenue, up 2.7% year on year in US-dollar terms and 3.2% in constant currency.
This makes HCLTech the stronger current profit-growth story even though TCS retains the better profitability ratios.
Margin: TCS still wins comfortably
TCS reported a 24.0% Q1 FY2027 operating margin, compared with HCLTech's 16.9% EBIT margin.
HCLTech's quarter included restructuring costs worth roughly 62 basis points of EBIT margin. Excluding those costs, margin would have been closer to 17.5%.
That still leaves a substantial gap to TCS.
TCS's margin advantage allows it to absorb wage increases, invest in new platforms and participate in pricing negotiations with greater flexibility.
HCLTech guides FY2027 EBIT margin of 17.5% to 18.5%, so even management's forward range remains well below TCS's current level.
The AI comparison cannot be reduced to one number
TCS and HCLTech disclose AI monetisation differently, so investors should resist putting their AI revenue numbers side by side without context.
TCS
TCS reported annualised AI revenue of $2.6 billion in Q1 FY2027, up 13.6% sequentially.
The company says it has completed more than 5,500 AI engagements and is expanding partnerships across the AI ecosystem.
Its Q1 wins included an $800 million AI-led transformation agreement with SKF alongside partnerships involving Anthropic, Mistral, ServiceNow and Google Cloud.
HCLTech
HCLTech reported $171 million of Advanced AI revenue, up 10.6% sequentially and 62.1% year on year in constant currency.
Its AI exposure includes AI engineering, infrastructure, physical AI, semiconductor work and planned AI data-centre investments.
The smaller reported figure is not evidence that TCS is exactly fifteen times larger in AI. The definitions are different.
The useful conclusion is that TCS has the larger monetised AI business, while HCLTech is currently reporting a much faster growth rate on its narrower Advanced AI measure.
Deal wins: TCS owns the larger order book
TCS's Q1 FY2027 total contract value reached $9.5 billion.
HCLTech reported $2.407 billion of new-deal TCV, which it described as its highest-ever Q1 bookings.
The definitions are not identical, but TCS clearly operates with the larger enterprise contract engine.
Its deal flow spans BFSI, manufacturing, healthcare, retail, utilities and technology customers.
HCLTech's current bookings are nevertheless important because they suggest strong demand despite a cautious global discretionary-spending environment.
HCLTech's current strength is not traditional outsourcing alone
HCLTech increasingly combines IT services with engineering, software, cloud infrastructure and AI infrastructure exposure.
This differentiates it from a pure application-services comparison.
Its engineering heritage provides exposure to semiconductor, product engineering, telecom, industrial technology and physical AI programmes.
HCLTech's planned investments in AI data centres add another layer of optionality, although those investments also create a more capital-intensive growth path than traditional offshore IT services.
TCS's advantage is the breadth of its enterprise relationships
TCS generates nearly half its revenue from North America and serves major clients across virtually every large enterprise vertical.
BFSI represented 32.1% of Q1 FY2027 revenue.
Consumer businesses contributed 15%, life sciences and healthcare 10.3%, manufacturing 8.7% and technology and services 8.5%.
This diversity reduces dependence on one client industry, although it does not eliminate exposure to global enterprise technology budgets.
Which company has the better five-year growth record?
The long-term growth difference is smaller than the current profitability gap.
HCLTech's five-year sales growth is approximately 11.54%, slightly above TCS at 10.22%.
TCS's five-year profit growth is about 8.70%, versus HCLTech at 8.35%.
TCS also leads five-year EPS growth, 9.42% versus 8.40%.
Neither company has produced explosive long-term earnings growth. The appeal is more about cash generation, resilience and capital efficiency than hypergrowth.
Which generates more cash?
TCS generates far more absolute free cash flow, while HCLTech has slightly better current operating cash conversion.
Bull Run records approximately ₹210,878 crore of five-year free cash flow for TCS, compared with ₹92,709 crore for HCLTech.
HCLTech's operating-cash-flow-to-net-profit ratio is approximately 1.20x, against TCS at about 1.06x.
Both figures indicate that accounting earnings are backed by cash.
The absolute scale of TCS's free cash flow gives it greater capacity for dividends, investment, acquisitions and strategic initiatives.
For dividend investors, HCLTech is currently more attractive
HCLTech's dividend yield of approximately 4.62% is materially above TCS at around 2.92%.
HCLTech declared a ₹12 per share dividend with its Q1 FY2027 results.
TCS also declared ₹12 per share for the quarter.
The same rupee dividend per share does not produce the same yield because the share prices differ.
Dividend investors should still consider earnings durability and payout policy rather than selecting solely on current yield.
Could HCLTech's higher P/E be justified?
Possibly, but the argument depends on future growth rather than current return ratios.
HCLTech's P/E of roughly 18.2x is above TCS at 15.9x even though its ROE, ROCE and margins are lower.
To justify that premium over time, HCLTech would need to sustain faster earnings growth, scale its Advanced AI business, convert record bookings into revenue and preserve cash conversion.
If growth normalises toward TCS levels without a corresponding margin improvement, the relative premium becomes harder to defend.
What has happened to the share prices?
HCLTech has been substantially more resilient over the last year.
| Period | TCS | HCLTech |
|---|---|---|
| 1 month | +3.38% | +3.52% |
| 3 months | +0.53% | +12.92% |
| 6 months | -13.28% | -4.20% |
| 1 year | -26.89% | -12.52% |
| 52-week high | ₹3,350 | ₹1,780.10 |
| 52-week low | ₹1,976.80 | ₹1,030 |
| RSI (14) | 42.70 | 43.25 |
The market has clearly rewarded HCLTech's recent earnings and AI momentum more than TCS's superior absolute profitability.
That relative resilience is one reason HCLTech now trades on the higher P/E.
TCS: the case investors are actually buying
The attractive parts
- 48.7% ROE.
- 58.5% ROCE.
- 24% Q1 operating margin.
- $9.5 billion Q1 TCV.
- $2.6 billion annualised AI revenue.
- ₹210,878 crore five-year FCF in Bull Run's current dataset.
- Effectively debt-free.
- Current P/E below both HCLTech and the IT-industry benchmark.
The questions
- Can constant-currency growth accelerate?
- Can AI revenue offset productivity pressure on traditional work?
- Will North American technology spending improve?
- Can TCS remain a 24% to 25% margin business while investing heavily in AI?
HCLTech: the case investors are actually buying
The attractive parts
- 20.3% latest quarterly profit growth.
- Record Q1 new-deal bookings.
- Advanced AI revenue up 62.1% YoY CC.
- 4.62% dividend yield.
- Strong operating cash conversion.
- Engineering and software exposure.
- AI data-centre optionality.
- Better one-year stock-price resilience.
The questions
- Can margins move toward the upper end of guidance?
- Will AI-infrastructure investments generate strong returns?
- Can record bookings translate into sustained revenue growth?
- Does the higher P/E adequately compensate for lower ROE and ROCE?
TCS vs HCLTech: which one wins where?
Market scale: TCS.
Current P/E: TCS.
P/B: HCLTech.
ROE: TCS.
ROCE: TCS.
Operating margin: TCS.
Net profit margin: TCS.
Latest quarterly profit growth: HCLTech.
Five-year sales growth: HCLTech slightly.
Five-year EPS growth: TCS.
Absolute free cash flow: TCS.
Dividend yield: HCLTech.
Q1 deal-book size: TCS.
Recent market performance: HCLTech.
Bull Run Score: Effectively tied.
TCS vs HCLTech FAQs
Which is cheaper?
TCS currently trades at about 15.9x earnings compared with HCLTech at roughly 18.2x.
Which has higher ROE?
TCS, at approximately 48.7% versus HCLTech at about 23.0%.
Which has higher ROCE?
TCS, at approximately 58.5% versus HCLTech at roughly 28.4%.
Which has better recent profit growth?
HCLTech. Bull Run's latest quarterly field shows profit growth of approximately 20.3%, compared with TCS at about 4.6%.
Which has the higher dividend yield?
HCLTech at approximately 4.62%, compared with TCS at around 2.92%.
Which company has more AI revenue?
The definitions differ. TCS disclosed $2.6 billion of annualised AI revenue, while HCLTech reported $171 million of Advanced AI revenue in Q1 FY2027.
Which has the larger deal book?
TCS reported Q1 total contract value of $9.5 billion. HCLTech reported $2.407 billion of new-deal TCV.
Research sources
Disclaimer
This comparison is educational and informational only. Financial and market data is based on company Q1 FY2027 disclosures and Bull Run's August 25, 2026 snapshot. Deal-book and AI-revenue definitions differ between companies and are not directly interchangeable. Valuation ratios, ownership, yields, margins and market prices change over time. Nothing here recommends buying, selling or holding TCS, HCLTech or any other security. Bull Run is not a SEBI-registered Research Analyst or Investment Adviser.