HCL Technologies tanks 10% after Q4 miss, cautious FY27 revenue guidance; analysts’ take

The company reported a 4.20% year-on-year (YoY) rise in consolidated net profit to ₹4,488 crore for the January-March quarter of FY26 (Q3 FY26), even as the management flagged a highly volatile demand environment shadowed by tariffs and softened discretionary spends, giving an FY27 growth guidance of 1-4%.

The Noida-headquartered firm had reported a consolidated net profit of ₹4,307 crore in the same period of FY25.

The firm's revenue from operations rose 12.34% to ₹33,981 crore in Q4 FY26, up from ₹30,246 crore seen in Q4 FY25.

Revenue guidance

The IT major projected its FY27 company revenue growth to be in the range of 1% to 4% in constant currency (CC). The company attributed the broad band of guidance to market volatility, reduced discretionary spend, and two client-specific situations where it expects some ramp-downs.

On a quarter-on-quarter basis, HCLTech's profit and revenue rose by 10.10% and 0.32%, respectively.

For the full fiscal year of 2025-26, HCLTech recorded a net profit of ₹16,642 crore, reflecting a 4.30% decline from ₹17,390 crore in FY25.

FY26 revenue stood 11.18% higher at ₹130,144 crore.

What the CEO said

HCLTech CEO and MD C. Vijayakumar termed the year as one of an uncertain demand environment.

"During the quarter, our performance came below our expectations due to softness in certain parts of our business, due to lower discretionary spending, and delayed decision-making.

"Our new AI-led service offerings are getting traction in the market and are reflected in annualised advanced AI revenues crossing USD 620 million in Q4. Our #1 priority in FY27 is to ensure the company is positioned right to take advantage of AI opportunities for multi-decade value creation," he said.

The company's advanced AI revenue reached $155 million in Q4, he said during the company's earnings call.

Management acknowledged that AI is causing a deflation of 2% to 3% per year in traditional segments (e.g., a $100 million deal is now being priced at $80 million due to AI efficiencies). However, new AI deal volumes seem to be offsetting this revenue loss.

"Momentum across our advanced AI offerings and overall AI portfolio remains strong, reflecting the strength of our early bets and our continued focus on AI that scales from experimentation to measurable business impact. Our pipeline remains robust and broad-based across segments, verticals, and regions, with AI increasingly integral to nearly all deal conversations," CVK said.

During the quarter ended March, HCLTech's IT & Business Services segment grew by 4.3% year-on-year (YoY), while Engineering and R&D Services (ER&D) registered a growth of 3.8% YoY.

The software segment witnessed a sharp decline, with revenue dropping 14.1% YoY.

Geography-wise performance

Geographically, the Indian market grew by 5.3%, while the Americas (USA) grew by 4.9%. The European market witnessed a contraction, declining by 2.9% YoY.

Deal wins

The company recorded a Total Contract Value (TCV) of new deal wins at $1,936 million for Q4 and $9,323 million for the full year FY26.

Headcount

HCLTech added 802 employees on a net basis in Q4, taking the total headcount to 227,181. The company onboarded 1,712 freshers in Q4, bringing the total fresher intake for FY26 to 11,744. The company did not share its hiring target for the next fiscal year.

Operating environment

On the prolonged West Asia crisis that affected many global businesses, HCLTech said the company's exposure to the Middle East is very limited, with the region contributing only about 1% to the revenues.

"We saw some impact in the software business during the quarter. Some of the decisions on procurement were delayed. We haven't seen any (impact) in the services business," CVK said.

What leading analysts said

HCL Technologies is likely to remain under pressure after the company’s Q4 FY26 performance missed expectations, with analysts flagging weak margins, soft demand trends, and cautious FY27 guidance.

According to JPMorgan Chase, HCLTech’s March quarter missed estimates across revenue, margins and earnings, with revenue coming in around 2% below expectations.

The financial services firm highlighted that the services segment saw 130 basis points downside, largely due to spending cuts by US telecom clients and SAP-related cancellations. The software business was also impacted by geopolitical uncertainty, with EBIT margins about 100 basis points below estimates.

JPMorgan expects telco weakness and SAP cancellations to persist into FY27, prompting a lower growth guidance of 1–4%. It also noted that foreign exchange gains will be reinvested into sales and general expenses, limiting margin expansion.

Morgan Stanley expects valuation premiums to normalise versus peers, as growth rates converge across IT companies.

It flagged that macro volatility could lead to client-specific challenges, while AI-led deflation in the core business may weigh on growth in the near term, even as new digital and AI services take time to scale.

Additionally, Morgan Stanley noted that incremental currency benefits are likely to be reinvested, further limiting upside to margins.