HCL Technologies: Brokerages remained largely positive on HCL Technologies after its Q1 FY27 earnings, with most retaining their existing ratings and target prices despite a mixed quarter. Firms highlighted strong deal wins, rapid AI revenue growth, and the company’s Rs 35 billion AI data centre investment as key positives, while cautioning that macroeconomic uncertainty and a subdued demand environment could keep revenue growth under pressure. Among major brokerages, Motilal Oswal retained its ‘Buy’ rating with the highest target price of Rs 1,450, while HDFC Securities remained the most bullish among the institutional brokerages with an ‘Add’ rating and a Rs 1,335 target.
Morgan Stanley on HCL Technologies
- Maintain Equal Weight
- Target price: Rs 1,152 vs Rs 1,105 earlier
- Services revenue growth guidance retained at 1.5-4.5 per cent year on year; EBIT margin guidance maintained at 17.5-18.5 per cent
- Advanced AI revenues at around 5 per cent of revenues grew 62 per cent year on year; 90 plus clients using AI Force platform
- Rs 35 bilion AI data centre investment earmarked; scalable to 50MW as full-stack play including GPUs and small language model capabilities
- Macro uncertainty persists; consensus earnings upgrades unlikely despite strong execution
- Stock up 15 per cent since June 30 versus peer group up 7-10 per cent; Morgan Stanley sees room for near-term underperformance at 16 per cent premium to peers
- FY27 earnings estimates raised 2 per cent; FY28 and FY29 raised less than 1 per cent
- Maintain ADD
- Target price Rs 1,335
- Q1FY27 revenue at $3,650 milion; services down 0.7 per cent quarter on quarter but up 3.5 per cent year on year in constant currency
- Guidance retained at 1.5-4.5 per cent services growth and 17.5-18.5 per cent EBIT margin; upper end implies growth recovery from Q2
- Net new deal total contract value at $2.4 bilion; highest ever Q1 excluding mega deals; client-specific issues being offset by new wins
- Advanced AI revenue at $172 milion, around 6 per cent of revenue; up 62 per cent year on year and 10 per cent quarter on quarter
- Rs 35 bilion AI data centre investment full-stack play funded through partners, committed client capacity and mix of equity and debt; value comes from AI services wrapped around it
- FY27-29 earnings estimates raised 3-5 per cent
- Valued at 16x June 2028 estimated EPS
Goldman Sachs on HCL Technologies
- Maintain Neutral
- Maintain target price Rs 1,180
- Q1FY27 revenue down 0.5 per cent quarter on quarter; second consecutive quarter of subdued sequential growth but better than consensus
- Deal wins strong and accelerating; trend different from TCS and LTIMindtree
- FY27 revenue growth guidance maintained; implied growth rates for rest of year suggest wide range of outcomes reflecting macro uncertainty
- HCL separately announced AI data centre plans with initial investment of up to Rs 35 bilion
- EBIT growth at higher end of Goldman Sachs coverage; premium multiple versus TCS and Infosys seen as reflecting this
- Sector revenue growth remains sluggish at low to mid single digit with limited acceleration visible
- Maintains ‘ADD’ | CMP: Rs 1,221 | TP: Rs 1,250
- Emkay remains constructive, citing strong deal wins and AI monetization, while maintaining ADD with a Target Price of Rs 1,250.
- Revenue declined 0.5 per cent QoQ (CC) due to seasonal weakness in Services and productivity commitments in large managed services contracts.
- EBIT margin improved 40bps QoQ to 16.9 per cent, aided by lower restructuring costs and forex gains, but missed estimates due to seasonal productivity impacts.
- Net new deal bookings remained strong at $2.4 bilion, taking trailing 12-month bookings to $9.9 bilion (+9 per cent YoY).
- Management retained its 1-4 per cent CC revenue growth and 17.5-18.5% EBIT margin guidance for FY27.
- Advanced AI revenue rose to $171 milion (~4.7 per cent of revenue), growing 10.6 per cent QoQ (CC).
- HCL Tech plans to invest up to Rs 35bn to build a 50MW AI data center and offer a full-stack AI platform spanning infrastructure, compute, AI models and managed services.
- Telecom, Technology and ER&D verticals remained weak, while Retail and Financial Services delivered healthy growth.
- Maintain buy with TP of Rs 1450
- Beat on revenues and deal TCV; margins in line with our estimates; FY27E services guidance maintained at 1.5-4.5 per cent
- Expect Co to deliver a USD revenue CAGR of ~4%/INR PAT CAGR of 12.0 per cent over FY26–28
- continue to like Co all-weather portfolio. Its investments in Sarvam and the AI data center business strengthen its long-term AI positioning
- HCL Tech is our preferred pick in the large-cap space
Nuvama on HCL Technologies
- Retain HOLD with Target Price of Rs 1300 from Rs 1400
- Good quarter; guarded outlook
- Q1 revenue fell -0.5 per cent CC QoQ, led by planned productivity commitments in large managed services contracts
- IT Services was flat CC QoQ while ER&D fell -3.7 per cent CC QoQ
- Software business grew +2.2 per cent CC QoQ. EBIT margins expanded 40bp QoQ to 16.9 per cent
- Guidance maintained; strong deal-wins; data-centre investment
- Net new TCV was solid at $2.4 bilion, highest-ever Q1 bookings.
- Advanced AI revenue grew 10.3 per cent QoQ (+62.1% YoY) to $172 milion.
- HCL Tech also announced its plan to set up an AI data centre (up to 50MW), with a planned investment of up to INR35bn
- Maintained guidance of 1-4 per cent consolidated growth (all organic), Services guidance of 1.5-4.5 per cent and margin guidance of 17.5–18.5 per cent.
HCL Technologies reported 20.3 per cent year-on-year growth in its net profit to Rs 4,624 crore in the first quarter of the financial year 2026-27. The profit after tax (PAT) stood at Rs 3,843 crore in the same quarter of the previous financial year. The IT major retained its revenue growth guidance at 1-4 per cent for FY27.
Profit (attributable to owners of the company) stood at Rs 4,624 crore during the just ended quarter, up from Rs 3,843 crore in the corresponding period of the preceding financial year.
IT services provider’s revenue from operations in Q1 FY27 rose 13.9 per cent YoY to Rs 34,579 crore, reflecting steady execution despite a challenging demand environment. The company’s revenue from operations stood at Rs 30,349 crore in Q1 FY26.
In dollar terms, the company’s revenue stood at $3.65 billion, reporting a decline of 0.9 percent on quarter-on-quarter basis. However, it was up 3 per cent YoY. Constant currency revenue dropped 0.5 per cent QoQ and grew 2.6 per cent YoY. The company’s services revenue fell 0.7 per cent quarter-on-quarter in constant currency and surged 3.5 per cent year-on-year.
Along with the quarterly results, HCL Technologies’ board has also declared an interm dividend of Rs 12 per equity share for the financial year 2026-27, with record date fixed on July 17, 2026 and payment date on July 27, 2026.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
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