Synopsis: HCL Technologies reported weak Q4 results due to telecom client spending cuts, falling product revenue, and slower deals. Brokerages are split some expect short-term pressure, while others remain positive on long-term AI-led growth and stable margins.
The shares of this Indian IT company that provides software, cloud, engineering, and digital services to global clients, helping businesses improve technology systems and adopt modern solutions are in the spotlight following targets given by brokerages after Q4.
With a market capitalisation of Rs. 3,35,395 cr, the shares of HCL Technologies Ltd were trading at Rs. 1235.10 per share, down from its previous close of Rs. 1277.20 per share.
Q4 Results
It reported strong growth, with sales rising 12% YoY to Rs. 33,981 crore. Net profit increased 4% to Rs. 4,490 crore, while EPS also grew 4% to Rs. 16.54. However, EBITDA growth was modest at 4%, showing mixed performance.
JM Financial commentary
JM Financial has downgraded the stock to ‘Reduce’ with a revised target price of Rs. 1,350, implying about 9% upside. It attributed weak performance to discretionary spending cuts from two large telecom clients and the discontinuation of SAP programs, which pressured services revenue and margins.
New deal momentum also slowed, with quarterly total contract value at USD 1.93 billion. The brokerage expects growth visibility to remain limited, as guidance assumes continued discretionary weakness and ramp-downs from flagged clients. It believes the demand environment will stay challenging in the near term, keeping earnings growth subdued.
Nomura commentary
Nomura maintains a ‘Buy’ rating with a target price of Rs. 1,600, implying about 29% upside from pre-correction levels, though it has cut FY27–FY28 earnings estimates by 5%–7%. It reported March-quarter revenue of USD 3,682 million, down 3.3% sequentially in constant currency, while EBIT margin stood at 16.5%, both below expectations.
The weakness was driven by a steep decline in the products business and slower deal wins, with total contract value at $1.9 billion, down 35% year-on-year. Nomura expects FY27 revenue growth of 1%–4%, with services growth at 1.5%–4.5%, and margin guidance remains steady at 17.5%–18.5%. It also flagged a 50 bps growth headwind from two clients and an additional 2%–3% revenue impact from AI-related deflation.
Motilal Oswal commentary
Motilal Oswal has reaffirmed a ‘Buy’ rating with a target price of Rs. 1,650, implying about 34% upside, despite acknowledging weak quarterly performance. It expects FY27 revenue growth in the range of 1%–4%, with services growth at 1.5%–4.5%, supported by a diversified business mix.
The brokerage highlighted HCL Tech’s strength in engineering and infrastructure services as a key buffer against demand softness. It also pointed to stable margins and strong cash generation as positives. While client-specific disruptions and early-stage AI-driven deflation remain near-term challenges, it believes the long-term structural growth story remains intact.
Elara Securities commentary
Elara Securities has maintained a ‘Sell’ rating and lowered its target price to Rs. 1,200 from Rs. 1,270, implying about 3% downside. It highlighted an unusually weak quarter, with revenue declining 3.3% sequentially in constant currency, driven by discretionary cuts from two large telecom clients and the discontinuation of SAP programs in manufacturing and retail.
The products segment also fell sharply by 28.1% sequentially, weighing on overall performance. Elara expects muted growth ahead, forecasting around 2.5% growth in FY27 and ~2% in FY28, along with earnings downgrades of 3%–5%. It believes sustained softness in discretionary spending and telecom weakness will continue to pressure results.
Jefferies commentary
Jefferies has turned cautious on HCL Technologies, downgrading it to ‘Underperform’ with a target price of Rs. 1,165, indicating about 6% downside. It has reduced earnings estimates by 1%–2% and cut valuation multiples due to a weaker growth outlook, expecting only modest organic revenue growth ahead with FY27 likely at the lower end of guidance.
The brokerage noted that both services and software segments disappointed in the March quarter, with a sharp decline in software revenue and services hit by telecom spending cuts.
Key concerns include reduced IT budgets in manufacturing and retail, discretionary cuts from two major telecom clients, worsening European outlook due to geopolitical issues, and AI-led deflationary pressures. It also warned that weaker growth expectations could lead to valuation compression as the stock continues to trade at a premium.
Axis Securities commentary
Axis Securities has downgraded HCL Technologies to a ‘Hold’ with a target price of Rs. 1,550, implying about 25% upside. It noted that the March quarter missed expectations across revenue, EBIT margin, and profit, with margin at 16.5%, declining both sequentially and year-on-year.
Despite near-term pressures from discretionary spending cuts and client-specific issues, it remains positive on long-term prospects supported by deal wins and AI-led opportunities. The firm expects a gradual recovery as restructuring initiatives and AI implementation progress. It also highlighted an estimated 2%–3% impact from AI-related deflation as a key near-term headwind.
In conclusion, brokerages are clearly divided on HCL Technologies, reflecting uncertainty in the near-term outlook. Most of the weakness is linked to telecom client spending cuts, slower deal wins, and early signs of AI-driven pricing pressure.
While some brokerages like Jefferies and Elara remain cautious or bearish, others such as Nomura and Motilal Oswal still see long-term upside driven by stable margins, strong engineering capabilities, and AI opportunities. Overall, the consensus suggests that the stock may remain under pressure in the short term, but long-term investors may still find value if growth stabilizes and demand improves.
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