Nuvama Institutional Equities has downgraded HCL Technologies to ‘Hold’ following what it called a “mixed” set of Q1FY26 results, citing weak EBIT margins and a sharp drop in deal wins. The brokerage also cut its target price to ₹1,630 from ₹1,700, maintaining its valuation multiple of 23x FY27E EPS.
In constant currency (CC) terms, HCL Technologies reported a 0.8% sequential decline in revenue to USD 3,545 million, which was slightly better than Nuvama’s and Street estimates of a 1% decline. However, operating profitability disappointed, with EBIT margin falling sharply by 170 basis points QoQ to 16.3%, below expectations.
The bigger concern, however, was the company’s total contract value (TCV) for Q1FY26, which stood at USD 1.81 billion — down 39% QoQ and 8% YoY, suggesting sluggish deal inflows at a time when peers are stabilizing their pipelines.
While HCL Tech narrowed its revenue growth guidance for FY26 to 3–5%, implying some optimism around faster deal ramp-ups in the second half of the year, it also revised its EBIT margin guidance downward, indicating near-term cost pressures. Management expects margins to normalise only by Q4FY26, making the near-term trajectory uncertain.
Nuvama has accordingly trimmed its FY26E/FY27E EPS estimates by 5.7% and 3.1%, respectively. The brokerage flagged the muted growth momentum and falling margins as headwinds and now expects a modest 5% EPS CAGR over FY25–27.
“Given the limited upside from current levels and a soft earnings growth profile, we downgrade HCL Tech to ‘Hold’,” the brokerage said in its note.
The downgrade comes amid a broader recalibration of expectations in the Indian IT sector, which has seen a tepid start to FY26 amid macroeconomic uncertainty in key markets like the US and Europe. HCL Tech’s Q1 also marked a sharp sequential drop in order wins, which could weigh on revenue conversion in the coming quarters.
