HCL Technologies might have started the day on a sour note with its shares price slipping over 4% post Q1FY26 results, but leading brokerages are not ready to hit the panic button. Despite missing margin expectations, brokerage firms like Motilal Oswal, Nomura, and Jefferies remain bullish, offering price targets that suggest up to 23% upside from current levels.
Let’s break down what is driving this optimism even amid short-term pressure.
Margin miss, Market reaction
HCL Tech reported a 10% YoY decline in consolidated net profit to Rs 3,843 crore for Q1FY26, missing Street estimates pegged at Rs 4,224 crore. Revenue and EBIT showed modest growth at 8.2% and 3%, respectively. The stock reacted to this in today’s trade, dropping more than over 4%. at the time of writing it was down 4.20%, trading at Rs 1,552.90.
Motilal Oswal on HCL Technologies: “HCLT remains the fastest-growing large-cap IT firm”
Motilal Oswal has retained a ‘Buy’ rating with a target price of Rs 2,000, indicating a 23% upside.
According to the brokerage, HCL Tech’s revenue beat and guidance revision reflect underlying strength. The margin miss was attributed to two main factors – higher GenAI and SG&A investments (30bps), and lower utilisation (80bps).
“We expect both these factors to spill over to Q2, but margins should normalise post that,” the report noted.
Motilal sees HCLT delivering a CAGR of 7% in USD revenue and 8.8% in INR PAT over FY25-27, and expects FY27 margins to recover to the 18-18.5% range.
Jefferies on HCL Technologies: Stronger growth ahead
Despite the sharp fall in margins, global brokerage Jefferies has upgraded HCL Technologies to a ‘Buy’, assigning a target price of Rs 1,850, implying a 13% potential upside from current levels.
According to the brokerage, the margin miss in Q1FY26 was a result of accelerated growth investments, which in the long term could position the company for stronger performance compared to peers.
“HCLT’s 1Q revenues were ahead, but profits missed estimates due to sharp margin decline,” Jefferies said in its note.
However, it highlighted that HCL Technologies has now raised its FY26 growth guidance to 3-5%, the highest among the Top 5 Indian IT firms.
“Management’s focus on investments, even at the cost of near-term margins, should support superior long-term growth prospects,” the brokerage firm noted in its report.
Jefferies expects 10% EPS CAGR over FY26–28 and sees HCL Technologies outperforming its large-cap peers in both growth and valuation metrics. It values the stock at 25x forward P/E, implying a premium over current one-year forward multiples of TCS and Infosys.
Nomura on HCL Technologies: Margin drop manageable, Revenue intact
Nomura has also reiterated a ‘Buy’ rating on HCL Technologies, with a target price of Rs 1,810, translating to an 11.7% upside. The brokerage believes that while the drop in margin guidance (by 100 basis points for FY26E) surprised the Street, most of the drag appears to be one-off and recoverable.
The Q1 miss, according to Nomura, was mainly caused by lower utilisation due to a delayed ramp-up, client-specific issues, and front-loaded investments in GenAI and sales.
“These include lower utilisation due to delayed ramp-up in a project for which onsite capacity had been built (80bp), client bankruptcy and one-time charge (30bp), higher investments in S&M (30bp), and lower software revenue (20bp),” the brokerage noted.
Nomura expects EBIT margins to normalise by FY27, targeting a recovery back to the 18-18.2% band, with interim FY26 margins at 17.5%. “We expect the Street to ignore near-term margin miss (as it is likely to reverse in FY27F) and focus on continued revenue outperformance,” the report stated.
Nomura adjusted its FY26-27 EPS estimates lower by 2-5% but maintained its bullish stance, highlighting that HCL Tech’s deal pipeline remains healthy, with two large closures expected in Q2FY26. It continues to value the stock at 25x FY27F EPS.
