HCL Technologies Q1FY26 Results Disappoint: Buy, Hold, or Sell? | PL Capital
- 15th July 2025
- 06:00:00 PM
- 3 min read
Mumbai | July 15 – HCL Technologies’ Q1FY26 results fell short of expectations, with the IT major reporting a sequential decline in revenue and a sharper drop in margins, reflecting the ongoing challenges in deal execution and cost pressures.
The company posted USD revenue of $3.54 billion, down 0.8% QoQ in constant currency, while consolidated EBIT margins slipped 170 basis points to 16.3%. The miss was attributed to lower utilization, continued investments in sales and AI initiatives, and a weaker performance in the Products and Platforms (P&P) segment, which saw a 7.1% QoQ decline.
Financial Snapshot: Q1FY26
- Revenue: ₹30,300 crore, up 0.3% QoQ, 8.2% YoY
- Gross Margin: 33.7%, down 20 bps QoQ
- EBIT Margin: 16.3%, down 170 bps QoQ
- PAT: ₹3,840 crore, down 10.8% QoQ, 9.8% YoY
- Interim Dividend: ₹12 per share
While the technology services vertical reported 6.6% QoQ growth, sectors like manufacturing, retail, and healthcare continued to face decision-making delays amid macro uncertainties, weighing on overall growth.
Guidance Cut as AI Push Continues
Despite raising the lower end of its FY26 revenue growth guidance to 3-5% YoY CC, HCL Technologies revised its EBIT margin guidance downward to 17-18% (from 18-19%), acknowledging the near-term margin impact of strategic investments in AI capabilities and sales ramp-ups.
The management indicated optimism about closing delayed large deals in Q2, which would be critical in supporting its revised guidance, while continuing to focus on building a differentiated AI-led service portfolio through partnerships like OpenAI.
Deal Wins Sluggish, but Long-Term Strategy Intact
New deal TCV for the quarter was weak at $1.8 billion, down from $3 billion in the previous quarter, primarily due to delays in closing two large transactions. The management clarified that the delays were structural rather than macro-driven, with closures now expected in the second quarter.
The focus on AI-led transformation remains central to HCL Technologies’ strategy, with investments aimed at strengthening capabilities in generative AI and expanding enterprise AI adoption among clients, even as it cannibalizes some revenues in the near term.
What Should Investors Do?
PL Capital has reiterated a ‘HOLD’ stance on HCL Technologies with a revised target price of ₹1,550, citing the near-term headwinds balanced by the company’s strategic positioning for long-term growth in AI and digital services.
“HCL Technologies is navigating a challenging environment with conscious investments for future growth. Investors should watch for deal closures and margin trends in the coming quarters to assess further upside potential,” said Pritesh Thakkar of PL Capital.
At current valuations of around 25x FY26E earnings, the stock offers stability but limited near-term upside, making it a hold for existing investors while fresh positions could be evaluated once clarity emerges on execution and margin recovery.
Read the full PL Capital report on HCL Technologies Q1FY26 results here
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
