Jefferies has upgraded HCL Technologies to a ‘Buy’ with a revised target price of ₹1,850, citing the company’s robust growth guidance for FY26 and its willingness to invest aggressively in long-term levers such as GenAI, sales and marketing. This comes despite HCL Tech’s Q1FY26 margins missing estimates sharply, causing a temporary hit to profitability.
The IT major reported Q1FY26 revenue of $3.545 billion, down 0.8% QoQ in constant currency, but above consensus expectations. Rupee revenue came in at ₹63,437 crore, while net profit rose 4.4% QoQ to ₹12,760 crore. However, EBIT margins fell to 16.3%, a decline of 170bps QoQ, which was the key negative for the quarter.
In its investor call, HCL Tech raised its FY26 revenue guidance to 3-5%, the highest among Tier-I Indian IT firms. However, it also revised its EBIT margin guidance downward to 17-18% from 18-19%, reflecting its accelerated investments in building capabilities for future growth — particularly in GenAI, employee reskilling, and sales.
Jefferies noted that while these investments have weighed on near-term profitability, they position HCL Tech well for delivering above-industry growth over the next few years. “We expect a 10% EPS CAGR over FY26–28, and believe these growth-enabling investments justify a premium valuation,” Jefferies said in its note. The brokerage has made a minor 0–2% cut in FY26–27 EPS estimates to reflect the margin compression.
The firm also highlighted that HCL Tech’s stock trades at a discount to peers like Infosys, and that the positive guidance, strong deal pipeline, and focus on long-term strategy could lead to re-rating.
