Mumbai: Shares of HCLTech plunged nearly 8 per cent on Wednesday, April 22, after the company reported a weaker-than-expected Q4FY26 performance and issued a subdued outlook for FY27. The sharp fall came as brokerages downgraded the stock and cut target prices, citing slowing growth and macro uncertainties.
The stock reaction reflects investor concerns over muted revenue guidance, weak deal momentum and continued pressure in key business verticals.
Brokerages cut ratings and targets
Several global and domestic brokerages turned cautious following the earnings announcement. InCred downgraded the stock to “reduce” and slashed its target price significantly, pointing to structural headwinds and weak deal bookings.
Nuvama Institutional Equities downgraded the stock to “hold” from “buy” and reduced its target price, noting that HCLTech’s subdued FY27 guidance narrows its growth gap with peers such as TCS and Infosys. This, analysts said, could lead to valuation convergence across the IT sector.
HSBC maintained a “hold” rating but cut its target, stating that earnings growth and stock returns may not compound at double-digit rates in the near term.
JPMorgan retained a “neutral” stance while lowering its target price, flagging weakness in the telecom vertical and the impact of SAP project cancellations. Meanwhile, Nomura reiterated a “buy” rating but trimmed its target and reduced earnings estimates for FY27 and FY28.
Q4 performance disappoints
HCLTech’s Q4FY26 results fell short of expectations across key parameters. The company reported a 3.3 per cent sequential decline in constant currency revenue, steeper than the anticipated 1 per cent drop.
EBIT margins stood at 16.5 per cent, below Street estimates of around 17.6 per cent. Additionally, the company missed its full-year FY26 revenue growth guidance, delivering 3.9 per cent growth against its projected range of 4 to 4.5 per cent.
Notably, the company also reported its first full-year profit decline in 16 years, raising further concerns among investors about its near-term growth trajectory.
Muted FY27 guidance weighs on sentiment
The company’s outlook for FY27 added to market worries. HCLTech expects constant currency revenue growth of 1 to 4 per cent, significantly lower than analyst expectations of 3 to 6 per cent.
Management attributed the cautious outlook to a slowdown in discretionary spending, particularly in the telecom sector. The company also highlighted the cancellation of two major SAP projects towards the end of the quarter, which impacted revenue visibility.
Additionally, some clients have scaled back spending, and the company expects these trends to persist into the first quarter of FY27. HCLTech acknowledged that visibility over the next 12 months remains limited due to the uncertain global business environment.
Margins improve, AI segment shows growth
Despite the weak revenue outlook, HCLTech provided some positive signals on profitability. The company raised its FY27 margin guidance to 17.5–18.5 per cent from the earlier 17–18 per cent range.
Its advanced AI segment also showed momentum, posting a 6.1 per cent sequential growth in constant currency to reach $155 million. The company indicated plans to reinvest foreign exchange gains into strengthening sales capabilities and expanding its generative AI offerings.
However, analysts noted that such reinvestments could limit margin expansion in the near term.
Stock performance under pressure
Ahead of the results, HCLTech shares had closed 0.7 per cent higher at Rs 1,439. While the stock has gained around 6 per cent over the past month, it remains down approximately 12 per cent so far in 2026.
The stock is also trading nearly 19 per cent below its 52-week high of Rs 1,780, reflecting ongoing investor concerns about growth visibility and sector-wide challenges.
Conclusion
HCLTech’s latest earnings highlight the challenges facing the IT services sector amid global uncertainty and reduced client spending. While margin improvements and AI-driven growth offer some optimism, weak revenue guidance and cautious management commentary have dampened investor sentiment.
Market participants are likely to remain watchful of deal wins, sector recovery and execution in emerging technology areas before reassessing the company’s growth prospects.
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