HCL Technologies Limited is navigating FY26 with tempered expectations, yet its strategic momentum remains intact. Sharekhan has maintained its “Buy” rating on the IT major with a revised price target of Rs 1,730, citing robust deal wins, AI-led opportunities, and a stable margin outlook amid macroeconomic headwinds. While Q4FY25 results were subdued, the company remains well-positioned for industry-leading growth, supported by a high-quality deal pipeline and all-weather portfolio. The stock trades at 21.6x FY26E and 19.7x FY27E earnings, reflecting room for valuation expansion.

Q4FY25 Earnings: Modest Revenue Uptick, Margin Slippage

HCL Technologies reported Rs 30,246 crore in revenue for Q4FY25, up 1.2% sequentially and 6.1% year-over-year. However, revenue growth in constant currency (CC) was nearly flat due to seasonality in its software business and slower growth in services.

EBIT margin declined by approximately 150 basis points quarter-over-quarter to 18%, missing Sharekhan’s estimate of 18.3%. The drop was attributed to salary hikes, sales investments, and weak seasonality, partially offset by forex gains.

Net profit stood at Rs 4,307 crore, reflecting a 6.2% QoQ decline but an 8.1% YoY improvement. The management reaffirmed its FY26 EBIT margin guidance in the 18–19% range.

Strong Deal Wins and Healthy Pipeline

HCL Tech’s total contract value (TCV) for new deal wins came in at a record $2.995 billion, a significant 43% QoQ and 31% YoY growth. The FY25 cumulative TCV was an impressive $9.3 billion.

The company continues to benefit from strong demand across verticals, especially in telecom, media, and digital engineering. No major project cancellations or ramp-downs were reported in Q4, signaling business stability.

FY26 Guidance: Conservative but Competitive

Management guided for 2–5% revenue growth in constant currency for FY26. The outlook reflects cautious optimism amid global macro uncertainties, including tariff-related headwinds and subdued discretionary IT spending.

At the higher end of the guidance range, assumptions include deal closures and a stabilizing environment. The company expects client demand for AI-led modernization, particularly through its platforms like AI Force and AI Foundry, to remain a key driver of growth.

Vertical and Geographic Performance

A vertical-wise and regional snapshot reveals a mixed performance:

Key Metrics and Valuation

The valuation remains attractive with a forward P/E of 21.6x FY26E and 19.7x FY27E, while RoE is expected to improve to 26.5% by FY27.

Investment Thesis and Analyst Take

Sharekhan remains bullish, citing:

Strong deal wins and pipeline

AI-led transformation demand

Operational efficiency and margin stability

The brokerage assigns a Buy rating with a revised target price of Rs 1,730, implying an upside from the current market price of Rs 1,480.

Risks to Monitor

Investors should be cautious of the following:

Rupee appreciation, which could dampen margins

Slowdown in discretionary tech spending globally

Geopolitical factors and cross-border tariff uncertainties

Bottomline: Staying the Course in Choppy Waters

Despite a challenging quarter, HCL Technologies has shown it possesses the ingredients for resilience—contract momentum, sectoral diversification, and a strong AI-focused portfolio. The market may be volatile, but the fundamentals support a continued bullish outlook.

For investors with a medium-to-long-term horizon, HCL Tech offers a balanced mix of growth, innovation, and value. With Sharekhan's revised target of Rs 1,730, the stock appears primed to reclaim lost ground and deliver above-average returns.