HSBC cuts IT majors’ targets ahead of Q2 results, says no longer 5-year buy-and-hold plays
According to HSBC, IT stocks, particularly top-tier companies, are no longer the traditional five-year, buy-and-hold compounding plays.
- Oct 3, 2025,
- Updated Oct 3, 2025 4:04 PM IST
HSBC just downgraded the target prices of most information technology (IT) stocks, citing multiple headwinds. The brokerage noted that FY24 and FY25 were hit by market share losses to global capability centres (GCCs), while both AI-driven deflation and a weak macro environment are weighing down FY26. It is worth noting that the target price downgrades occurred ahead of the Q2 results season, which is slated to begin on October 9. HSBC Global Investment Research has downgraded the target prices of IT majors Tata Consultancy Services to Rs 3,260 (from Rs 3,665 earlier), Infosys to Rs 1,720 (from Rs 1,790), and HCL Technologies to Rs 1,580 (from Rs 1,730). According to HSBC, IT stocks, particularly top-tier companies, are no longer the traditional five-year, buy-and-hold compounding plays. Instead, they now demand far more active management to navigate their cycles and volatility. It also slashed the target price of Tech Mahindra (Rs 1,710 from Rs 1,900), Coforge (Rs 1,795 from Rs 1,850), L&T Tech (Rs 4,695 from Rs 4,790), Persistent (Rs 5,545 from Rs 6,000), Cyient (Rs 1,340 from Rs 1,445), and KPIT (Rs 1,270 from Rs 1,325). Tata Elxsi and TCS will announce their Q2 results on October 9. On the other hand, HCL Technologies and Infosys will report their results for the quarter ended September 2025 on October 13 and October 16, respectively. HSBC believes that the second-quarter results of the IT sector are unlikely to be much different from the previous quarter (Q1) as demand weakness persists. The ongoing weakness in the IT sector is also visible with the tepid performance of the Nifty IT index, which has declined more than 25% so far from its 52-week high levels scaled in December 2024. On the other hand, select IT majors such as TCS, Infosys, HCL Technologies and Wipro have declined somewhere between 20%-35% during the same period. HSBC Global Investment Research believes that large-tier companies may post 0%-2% qoq growth (in dollar terms), while for mid-tier, we assume 1% to 5.5%. “It is unlikely that Infosys and HCL Technologies will change the upper-end of their full-year guidance. Infosys' guidance for the full year is 1-3%, which is a 0.3-1.0% CQGR, and for HCL Technologies, it is 3-5%, which is a 0.6-2% CQGR. We do expect some recovery in growth for Wipro, alluded to in its Q3 guidance, which we expect to be 1-2% q-o-q growth,” the global brokerage said. Considering the past three years of low growth and expectation of a cyclical rebound in FY27, HSBC expects the IT sector to at least perform in line with the broader market. “We continue to expect a 2-3% annual impact on growth from AI over the next 3-4 years,” the brokerage said in a report.
HSBC just downgraded the target prices of most information technology (IT) stocks, citing multiple headwinds. The brokerage noted that FY24 and FY25 were hit by market share losses to global capability centres (GCCs), while both AI-driven deflation and a weak macro environment are weighing down FY26. It is worth noting that the target price downgrades occurred ahead of the Q2 results season, which is slated to begin on October 9. HSBC Global Investment Research has downgraded the target prices of IT majors Tata Consultancy Services to Rs 3,260 (from Rs 3,665 earlier), Infosys to Rs 1,720 (from Rs 1,790), and HCL Technologies to Rs 1,580 (from Rs 1,730). According to HSBC, IT stocks, particularly top-tier companies, are no longer the traditional five-year, buy-and-hold compounding plays. Instead, they now demand far more active management to navigate their cycles and volatility. It also slashed the target price of Tech Mahindra (Rs 1,710 from Rs 1,900), Coforge (Rs 1,795 from Rs 1,850), L&T Tech (Rs 4,695 from Rs 4,790), Persistent (Rs 5,545 from Rs 6,000), Cyient (Rs 1,340 from Rs 1,445), and KPIT (Rs 1,270 from Rs 1,325). Tata Elxsi and TCS will announce their Q2 results on October 9. On the other hand, HCL Technologies and Infosys will report their results for the quarter ended September 2025 on October 13 and October 16, respectively. HSBC believes that the second-quarter results of the IT sector are unlikely to be much different from the previous quarter (Q1) as demand weakness persists. The ongoing weakness in the IT sector is also visible with the tepid performance of the Nifty IT index, which has declined more than 25% so far from its 52-week high levels scaled in December 2024. On the other hand, select IT majors such as TCS, Infosys, HCL Technologies and Wipro have declined somewhere between 20%-35% during the same period. HSBC Global Investment Research believes that large-tier companies may post 0%-2% qoq growth (in dollar terms), while for mid-tier, we assume 1% to 5.5%. “It is unlikely that Infosys and HCL Technologies will change the upper-end of their full-year guidance. Infosys' guidance for the full year is 1-3%, which is a 0.3-1.0% CQGR, and for HCL Technologies, it is 3-5%, which is a 0.6-2% CQGR. We do expect some recovery in growth for Wipro, alluded to in its Q3 guidance, which we expect to be 1-2% q-o-q growth,” the global brokerage said. Considering the past three years of low growth and expectation of a cyclical rebound in FY27, HSBC expects the IT sector to at least perform in line with the broader market. “We continue to expect a 2-3% annual impact on growth from AI over the next 3-4 years,” the brokerage said in a report.