HCL Tech Q2: Stock rises as FY26 guidance lifts to 4-5%

Market reaction: HCL Tech rises, outpaces Nifty

Shares of HCL Technologies rose nearly 3% on Tuesday after the company’s second-quarter earnings beat Street expectations and it raised the lower end of its guidance. The stock climbed as much as 2.7% during the day to ₹1,535 per share, its highest level since July 24 this year. It later pared gains to trade 1.5% higher at ₹1,516 apiece as of 9:45 AM. Over the same period, the Nifty 50 was up 0.04%. The move reflected a positive reaction to guidance changes and commentary around demand visibility. Even as analysts flagged some execution and conversion lags, the intraday response suggested investors were positioning for steadier growth expectations.

The key trigger: guidance raised on constant currency basis

A central driver of the rally was HCL Technologies raising the lower end of its full-year growth outlook. The company now expects to grow between 4% and 5% on a constant currency basis for the full year, up from 3-5% projected in July. In a separate guidance update also referenced by analysts, HCL Tech raised IT services growth guidance to 4–5% year-on-year in constant currency (from 3–5%). The company also reaffirmed FY26 services growth guidance at 4-5%. Some commentary in the notes suggested expectations closer to 5.1%. Management’s decision to lift the floor of the range mattered because the market had been watching for clarity on near-term demand and conversion from bookings to revenue.

Deal wins highlighted: $1.6 billion in bookings

Alongside guidance, deal momentum was another headline point. The company reported strong deal wins worth $1.6 billion. Brokerages cited this number as supportive of medium-term revenue visibility, particularly when accompanied by a “healthy pipeline” assessment in research notes. Still, analysts also pointed to a lag between total contract value (TCV) pick-up and revenue conversion, suggesting that bookings strength does not translate immediately into reported growth. The balance between strong deal flow and timing of ramp-ups helped explain why some research houses turned more constructive while others stayed cautious.

Margin lens: EBIT margin of 17.5% and restructuring impact

On profitability, the company’s EBIT margin was cited at 17.5%, with an implied ~18% excluding restructuring. This framing mattered because a portion of margin performance depended on one-offs rather than purely underlying operations. In earlier commentary around guidance, HCL Tech also discussed operating margin ranges and revisions for the full year, reflecting that margin stability remains a key debate point in the stock. Analysts highlighted that modest service ask rates and the revenue conversion lag can limit near-term estimate upgrades even when quarterly execution appears strong.

Brokerages split: targets cluster between ₹1,550 and ₹1,850

Analyst views were mixed, with published targets spanning roughly ₹1,550 to ₹1,800 in the current set of notes, and some higher targets cited elsewhere after results. Emkay Research retained an ‘Add’ rating with a target price of ₹1,550 per share, noting strong Q2 performance, robust deal bookings and a healthy pipeline, while also pointing to softness in Software that kept overall revenue guidance unchanged at 3-5%. Nuvama, with a price target of ₹1,650 per share, maintained a Hold call and said valuations were in line with peers, leading to a slight upward revision in its target price. Motilal Oswal (MOSL) maintained a Buy rating with a revised target price of ₹1,800, up from ₹1,750. Separately, Citi Research maintained a neutral call with a target price of ₹1,650 per share. Jefferies upgraded its outlook to buy with a higher target price of ₹1,850 per share.

Another set of calls: downgrades, and higher targets elsewhere

Not all research notes moved in the same direction. One brokerage downgraded the stock to ‘hold’ and cut its target price to ₹1,630 from ₹1,700, citing valuation concerns. Emkay Global also trimmed its target price to ₹1,660 while retaining a ‘reduce’ outlook. In another post-results roundup, various brokerage firms were cited as having raised target prices up to ₹2,125. Nomura maintained a buy rating while raising its target price to ₹2,000 from ₹1,900. Investec maintained a sell rating while hiking its target to ₹1,540 from ₹1,312. The spread in targets underlined that the debate is less about one quarter’s print and more about the durability of growth and margins.

What stayed cautious: conversion lag and revenue guidance limits

Even after a guidance uplift, analysts pointed to constraints that can cap near-term estimate upgrades. Research commentary cited modest service ask rates and a lag between TCV pick-up and revenue conversion as key reasons revisions to FY2026–28 revenue estimates could remain limited. Emkay Research also referenced unchanged consolidated revenue growth guidance of 3-5%, despite a tighter services revenue growth guidance of 4-5% for FY26, due to softness in Software. This split between services momentum and software softness is important because it affects how investors think about mix and consolidated outcomes.

Timeline context: a prior session saw the stock slip on Q1

The Tuesday rally came against a backdrop of a more cautious reaction earlier in the year. On Tuesday, July 15, shares slipped after the company reported a disappointing first-quarter earnings show for the quarter ended June 30, 2025. HCLTech reported a 10% decline in consolidated net profit at ₹3,843 crore, compared with ₹4,257 crore in the year-ago period. At 9:16 a.m. that day, shares were quoted at ₹1,615, down 0.3% on the NSE. In those Q1 notes, the company also lowered its operating margin guidance for the full year to 17-18% from 18-19%, while updating FY26 constant currency revenue growth forecast to 3-5% and raising the upper end from 2-5%.

Key data points at a glance

Market impact: what the guidance change signals

The immediate market impact was reflected in HCL Tech outperforming the benchmark on the day, as investors responded to the higher lower-end growth outlook. The revision to 4-5% constant currency growth, from 3-5% earlier, reduced downside uncertainty around FY26 services momentum. Deal wins of $1.6 billion reinforced confidence in the order pipeline, even as analysts flagged the lag between bookings and revenue recognition. Broker commentary also showed that valuation and margin trajectory remain swing factors, which is why ratings ranged from buy to hold to reduce. In practical terms, the stock reaction suggests that guidance direction and deal commentary can outweigh concerns about a “flat” profit narrative in the short term.

Analysis: why broker targets vary so widely

The variation in targets reflects different weightings on the same disclosed facts. More positive houses leaned on deal wins, guidance tightening to 4-5% services growth, and the view that AI-driven demand can support growth, while also expecting ramp-ups to improve. More cautious houses focused on valuation, softness in Software that keeps consolidated guidance at 3-5% in some notes, and the timing gap between TCV additions and revenue conversion. Margin interpretation also differed depending on whether analysts looked at the 17.5% reported EBIT margin or the ~18% figure excluding restructuring. With the stock sensitive to both growth visibility and margin guardrails, the debate is likely to stay anchored to execution updates in upcoming quarters rather than one-off quarterly beats.

Conclusion: rally on raised guidance, focus shifts to execution

HCL Technologies’ stock moved higher after Q2 results and a raised lower-end growth outlook, supported by $1.6 billion in deal wins and reiterated FY26 services growth guidance of 4-5% on a constant currency basis. Brokerages stayed divided, with targets ranging from about ₹1,550 to ₹1,850 in current notes, and higher targets cited in broader post-results roundups. The next key watchpoints will be how quickly large deal bookings convert into revenue and how margins track against guidance, especially after accounting for restructuring effects.