HCL Tech shares fall 10% on weak FY27 guide, Q4 miss

What happened to HCL Tech stock on Wednesday

HCL Technologies Ltd shares dropped sharply in Wednesday’s session after the company’s March quarter (Q4FY26) performance and FY27 outlook disappointed investors. The stock fell 9.7% to an intraday low of Rs 1,301.60 on the BSE. The decline pushed HCL Tech’s market capitalisation down to Rs 3,55,530 crore.

The sell-off also reshuffled market-cap rankings. After the fall, HCL Tech slipped below ITC, NTPC, Kotak Mahindra Bank, Adani Ports and Special Economic Zone, and ONGC.

Brokerages responded with target price cuts and, in some cases, downgrades. Commentary focused on softer growth visibility, weaker deal momentum, and the margin miss in Q4.

The immediate triggers: FY27 guidance and a weak Q4 print

Analysts highlighted that HCL Tech’s FY27 guidance did not meet Street expectations, which set the tone for the day’s reaction. That concern was compounded by a softer quarterly performance across key operating metrics.

For Q4FY26, revenue in dollar terms fell 3.3% quarter-on-quarter to $1,682 million. This was weaker than the consensus expectation of a 1.6% QoQ decline, according to analysts cited in the report. The revenue miss mattered because the market was already sensitive to signs of slowing client spending and delayed decision-making.

Operating profitability was another pressure point. The company reported an EBIT margin of 16.5%, below the consensus estimate of 17.6%, signalling weaker operating leverage during the quarter.

Deal momentum weakened as net new wins fell

A key datapoint flagged by analysts was the slowdown in deal wins. Net new deal wins were reported at $1.9 billion, down 35% year-on-year. In addition, the annual total contract value (TCV) of net new bookings was described as soft at $1.3 billion, with broker commentary pointing to the macro environment and AI-linked deflation on renewals.

Deal momentum is closely watched for Indian IT services companies because it shapes near-term revenue visibility and utilisation. When deal wins soften alongside weaker margins, investors typically reprice growth expectations and valuation multiples.

AI-driven deflation enters the conversation

HCL Tech also flagged a split in how artificial intelligence could affect revenue pools. The company expects 40% of industry revenue to face 3-5% deflation due to AI productivity. At the same time, it expects 55% of revenues to benefit from AI-led tailwinds, supported by higher spending on data, cybersecurity, and cloud, with growth over 10% in that portion.

This framing became part of the market narrative because it suggests pressure on renewal pricing in some areas, even as other segments may see higher demand. Brokerages linked this to the near-term caution visible in guidance and bookings.

How brokerages changed targets and ratings

The post-results reaction included multiple target cuts, reflecting lowered earnings estimates and a more cautious outlook.

Nomura said it reduced FY27-28 earnings estimates by 5-7% and cut its target price to Rs 1,600 from Rs 1,700.

JM Financial downgraded HCL Tech to ‘Reduce’ and cut its target to Rs 1,350 from Rs 1,440. It also noted that its assigned valuations for HCL Tech are at a 14% premium over Infosys.

Choice International maintained an ‘ADD’ rating but reduced its target to Rs 1,500 from Rs 1,600.

HDFC Institutional Equities maintained a BUY rating with a revised target of Rs 1,465. It said the annual TCV softness reflected the macro environment and AI deflation on renewals, while calling margin guidance of 17.5-18.5% encouraging despite FY26 EBIT margins ending at 17.2%. HDFC also said it cut its EPS estimate by 4% and valued the stock at 18x FY28E EPS.

Nuvama downgraded to ‘HOLD’ and cut the target to Rs 1,400 from Rs 1,550, saying HCL Tech’s weak FY27 guidance converges its growth differential versus TCS and Infosys, which may also drive valuation convergence. It also downgraded its target multiple to 18x FY28 P/E.

Key numbers at a glance

Target price changes and calls

Market impact: why the reaction was so sharp

The market reaction combined several negatives arriving together: a revenue miss versus expectations, weaker profitability than consensus, and a noticeable slowdown in net new deal wins. On top of that, the FY27 guidance was seen as underwhelming, prompting analysts to cut earnings estimates and rework valuation assumptions.

The stock’s sharp fall also had an index and positioning angle, given HCL Tech’s size within the IT space and its position as the third largest IT firm. The market-cap drop and the slip below multiple large-cap peers reinforced the risk-off tone around the name on the day.

Analysis: what investors will watch next

Going forward, investors are likely to track whether booking momentum improves from the $1.9 billion quarterly net new deal wins and whether execution stabilises enough to lift EBIT margins from the 16.5% Q4 level. The AI discussion adds another layer because it introduces a clear near-term pricing headwind for some renewal pools, even as HCL Tech points to faster growth opportunities in data, cybersecurity, and cloud.

Broker notes also suggest a valuation debate. With Nuvama pointing to convergence in growth differentials versus TCS and Infosys, the market may focus on whether HCL Tech can preserve any premium positioning through better growth delivery or margin resilience.

Conclusion

HCL Tech’s near-10% fall was driven by a combination of soft FY27 guidance, a Q4 revenue and margin miss, weaker deal wins, and a wave of brokerage target cuts. The next set of investor focus points will be execution against margin guidance of 17.5-18.5%, deal conversion, and how AI-linked deflation and AI-led spending tailwinds play out in client budgets.