Why HCL Tech shares fell despite FY26 guidance revision; should you buy?

Shares of HCL Technologies Ltd (HCL) fell nearly 2 per cent in Tuesday's trade even as the IT major upgraded its FY26 services guidance to 4.75-5.25 per cent in constant currency (CC) terms, placing HCL Tech among the fastest-growing large cap IT firms. The revision in guidance implied 1.7 per cent sequential or 5.5 per cent YoY CC organic growth in Q4 despite seasonality.  

Despite acknowledging it, Nuvama said the current HCL Tech valuations leave limited upside potential, as earnings upgrades also appear unlikely. 

"We continue to like HCL Tech’s revenue growth and cash flow profile. However, with valuations at 21 times FY27 PE—at slight premium to TCS and Infosys—we see limited upside potential from current levels. Maintain ‘HOLD’ solely on expensive valuations," it said.

By 9.52 pm, the stock had fallen 2.35 per cent to hit a low of Rs 1,628.80 apiece.

Nirmal Bang Institutional Equities downgraded the stock to a ‘Hold’ from ‘Buy’ despite a strong quarter as the stock had run up 13 per cent over the last three months and Q4 growth expectations and uncertain macro will weigh on further upside. 

"We are giving a target price of Rs 1,789 (vs 1,727 earlier) as we roll forward to Dec-27E EPS, valuing the company at 22.4 times (5-yr mean +0.5SD) vs the earlier 22x.

The broking firm believes large cost optimisation and vendor consolidation
projects with Gen AI, cloud, and data will continue to support growth for HCL Tech. 

"The AI push will help margins and revenue, while caution will come from the life sciences vertical, which has been subdued for the past 2-3 quarters. The guidance points to a slow 4Q and we believe the integration of the 3 recent acquisitions will contribute to growth only after 1QFY27. Post-3QFY26, we have only marginally tweaked our estimates for revenue, margins, and EPS," Nirmal Bang said.