HCLTech Shares Tank 4% After Q1 Underwhelms, Margin Misses

Shares of HCL Technologies plunged as much as 4% on July 15, after the IT services major reported a weaker-than-expected performance for the first quarter of FY26, attracting a mixed response from brokerages.

For the June quarter, HCLTech reported a 6.8% QoQ decline in consolidated net profit, which fell to ₹3,843 crore from ₹4,123 crore in Q4FY25. Meanwhile, consolidated revenue rose 0.9% QoQ to ₹30,349 crore, up from ₹30,127 crore in the previous quarter.

A key concern this quarter was the operating margin, which fell sharply to 16.3%, down 160 basis points from 17.9% in Q4 FY25. Taking this pressure into account, HCLTech revised its full-year margin guidance downward to 17–18% from the earlier 18–19% range.

While the company raised the upper end of its constant currency revenue growth guidance to 5% (from 2–5% earlier), the downward revision in margins has sparked concerns among analysts. Nuvama Institutional Equities noted that although the updated guidance reflects expectations of faster deal ramp-ups, the lower margin forecast signals near-term challenges. The brokerage downgraded the stock to ‘hold’ and cut its target price from ₹1,700 to ₹1,630, citing valuation concerns.

Echoing similar sentiment, Emkay Global reduced its target price to ₹1,660 while retaining its ‘reduce’ rating. The firm attributed the margin miss to lower utilisation, higher investments in sales, marketing and generative AI, an unfavourable business mix, and a one-off impact. “Ebit margin fell 170 basis points quarter-on-quarter to 16.3%, missing our estimates,” it noted.

Citi Research maintained a ‘neutral’ call with a target price of ₹1,650, highlighting a mixed quarter. The brokerage applauded the signs of improvement in the BFSI and Tech verticals even as demand in other segments remained weak. Despite that though, Citi flagged no signs of broader demand deterioration.

On the more optimistic end, CLSA retained its ‘outperform’ rating with a price target of ₹1,867. The brokerage believes that margins could bounce back to the 18–19% range from FY27, with near-term softness seen as transitory.

Jefferies came out with the most upbeat outlook, upgrading its call to ‘buy’ and raising the price target to ₹1,850. It cited the upward revision in HCLTech’s FY26 revenue guidance to among the highest across India’s top five IT players, as a key driver of its bullish stance. Jefferies also noted that continued investments in newer technologies could underpin stronger growth and support a premium valuation in the future.