HCL Technologies has announced its Q1FY26 financial results, reporting a consolidated net profit of ₹3,843 crore — a 9.73% decline compared to ₹4,257 crore in the same quarter last year. Despite the drop in profits, the company saw a steady rise in revenue from operations, which came in at ₹30,349 crore, marking an 8.17% year-on-year increase. On the constant currency (CC) basis, revenues fell 0.8% quarter-on-quarter (QoQ) to USD 3,545 million, performing slightly better than the street’s expectation of a 1% decline.
The EBIT margin for the quarter declined by 170 basis points sequentially, settling at 16.3%, which was below estimates. The company also witnessed a steep drop in total contract value (TCV), which came in at USD 1,812 million — a 39% fall QoQ and 8% YoY. These factors led to a mixed perception of the quarterly performance.
One of the key updates from the company was the revision of its revenue growth guidance for FY26. HCLTech raised its FY26 CC revenue growth forecast to 3-5%, the highest among the top five Indian IT companies. However, this was accompanied by a 100 basis points cut in margin guidance, attributed to accelerated investments aimed at driving future growth. Management expects margins to normalize by Q4FY26.
Brokerages have shared varied reactions following the earnings announcement.
Nuvama has downgraded HCLTech from a ‘Buy’ to a ‘Hold’ rating, setting a target price of ₹1,630. Nuvama noted that while the revenue decline of 0.8% CC QoQ was slightly better than expected, the fall in EBIT margin and weak TCV pointed to operational concerns. They also trimmed FY26E and FY27E earnings per share (EPS) estimates by 5.7% and 3.1%, respectively.
Jefferies, on the other hand, has upgraded the stock to ‘Buy’ with a target price of ₹1,850. It noted that while the company’s first-quarter revenues exceeded estimates, the miss on profit was due to a sharper-than-expected decline in margins. Jefferies highlighted the company's upbeat guidance and aggressive growth investments as potential long-term positives.
Citi maintained a ‘Neutral’ stance with a target price of ₹1,650. It described the Q1 performance as mixed, pointing out that IT services revenue was largely flat QoQ and margins slipped by 150 basis points. Citi also flagged a weak performance from the HCL Software segment, which posted a 3% YoY decline in revenue. The brokerage lowered FY26E and FY27E EPS forecasts by around 5% and 3%, respectively.
CLSA retained its ‘Outperform’ rating with a price target of ₹1,867. It acknowledged that the 0.8% QoQ CC revenue decline, especially the 0.1% dip in the services business, was expected in what is typically a seasonally weak quarter. However, the miss on EBIT margin, which stood at 16.3% versus an estimated 17.2%, led to a 5% operational miss according to CLSA. That said, the upward revision of full-year revenue guidance offered some reassurance.
Overall, while HCLTech’s revised growth outlook and revenue stability provide a silver lining, weak margins and subdued deal wins have left brokerages cautiously optimistic. Investors are likely to closely monitor whether the company’s aggressive investment push will yield margin recovery in the quarters ahead.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Readers are encouraged to consult with their financial advisor before making any investment decisions.
