Hexaware Stock Plummets 17% After Brokerage Downgrades

Introduction

Shares of Hexaware Technologies Ltd. witnessed a sharp decline for the second consecutive day on Friday, February 6, 2026, tumbling another 8%. This extended the 9% loss from the previous session, bringing the total two-day fall to over 17%. The sell-off was triggered by the company's fourth-quarter results for the calendar year 2025, which revealed pressure on profitability, prompting a series of downgrades and price target cuts from major financial institutions.

The Catalyst: Q4 Earnings and Margin Pressure

The primary driver behind the negative market sentiment was Hexaware's financial performance for the quarter ending December 2025. While the company reported a 1.4% decline in revenue in constant currency terms, this was largely in line with market expectations. However, the key disappointment came from its operating margins, which contracted by 60 basis points. This miss on profitability was a significant concern for investors and analysts, overshadowing the revenue figures.

Profitability metrics are closely watched in the IT services sector as they indicate a company's operational efficiency and pricing power. A contraction in margins suggests rising costs or an inability to command premium pricing, which can impact future earnings. The market's reaction underscores the importance of maintaining healthy margins, especially in a competitive environment.

A Cascade of Brokerage Downgrades

Following the earnings announcement, several prominent brokerages swiftly revised their outlook on Hexaware Technologies. The downgrades added significant downward pressure on the stock price.

JPMorgan downgraded the stock from 'overweight' to 'neutral', delivering a sharp cut in its price target from ₹780 to ₹640. Similarly, HSBC revised its rating from 'buy' to 'hold' and lowered its price target substantially from ₹970 to ₹735. Other firms, including Nuvama and Avendus Spark, also followed with downgrades, signaling a broad-based loss of confidence among analysts.

These actions reflect concerns about the company's near-term growth and profitability trajectory. The revised price targets suggest that analysts see limited upside potential until there is clear evidence of margin stabilization and improved growth.

Stock Performance Under Pressure

The impact on Hexaware's stock was immediate and severe. After falling 9% on Thursday, the stock opened lower on Friday and hit an intraday low of ₹572.5. At this point, the stock was down a staggering 20% from its issue price of ₹708, indicating significant wealth erosion for recent investors. Although the stock recovered slightly from its lows, it closed the session with substantial losses, trading around ₹614, down 4.3% for the day.

Management's Forward Outlook

Despite the weak quarterly performance, Hexaware's management presented a more optimistic outlook for the future. The company guided for revenue growth in 2026 to be better than the 7.6% achieved in 2025. Furthermore, it projected the EBIT margin to stabilize in the range of 13% to 14% for the upcoming year. The management also highlighted that deal wins had accelerated towards the end of 2025, which could provide a foundation for stronger performance in 2026. This forward-looking guidance aims to reassure investors about the company's long-term prospects.

Valuation and Industry Context

The sharp correction in Hexaware's stock price also brings its valuation into focus. With a price-to-earnings (P/E) ratio of approximately 32x prior to the fall, the stock was trading at a premium compared to industry leaders like TCS (22.5x P/E) and Infosys (23.38x P/E). This high valuation made the stock particularly vulnerable to any negative news, as seen in the reaction to the margin miss. Investors are now reassessing whether this premium is justified given the current operational challenges.

Conclusion

The significant two-day decline in Hexaware Technologies' share price is a direct consequence of its Q4 2025 margin miss, which overshadowed its in-line revenue performance. The subsequent wave of downgrades from influential brokerages amplified the negative sentiment. While the management's outlook for 2026 provides some hope for a recovery, investors will likely remain cautious, closely monitoring the company's ability to stabilize margins and deliver on its growth promises in the coming quarters.