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HCL Tech Shares Plunge 10% on Weak Earnings, Broker Downgrades

HCL Technologies shares plunged over 10% following disappointing Q4 results and weak FY27 revenue guidance. The company projected just 1-4% growth, missing its own previous outlook and triggering multiple broker downgrades. Jefferies took the most bearish stance, downgrading the stock to "Underperform" with a Rs 1,165 target price. Management cited reduced US telecom spending, SAP project cancellations, and AI-related deflationary pressures as key challenges.

Key Points: HCL Tech Shares Plunge 10% on Weak Earnings

  • Shares fell 10% to Rs 1,289 on NSE after weak Q4 earnings
  • FY27 revenue guidance of 1-4% growth, below expectations
  • Market cap dropped Rs 38,000 crore to Rs 3.53 lakh crore
  • Jefferies downgraded stock to "Underperform" with target price of Rs 1,165
  • Weakness driven by reduced US telecom spending, SAP project cancellations
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HCL Tech shares plunge 10 pc as weak earnings trigger broker downgrades

HCL Technologies shares fell over 10% after weak Q4 results and subdued FY27 guidance triggered multiple broker downgrades and target price cuts.

"Management attributed the weak performance to reduced discretionary IT spending by two major US telecom clients - HCL Tech"

Mumbai, April 22

Shares of HCL Technologies tumbled sharply on Wednesday, falling more than 10 per cent to Rs 1,289 on the NSE, as investor sentiment turned negative following a disappointing quarterly performance and subdued growth outlook.

The steep decline came after several brokerages downgraded the stock and cut their target prices, citing concerns over weak revenue growth, margin pressures and cautious forward guidance.

The company's earnings report highlighted multiple areas of concern. Alongside its fourth-quarter results, HCL Technologies projected FY27 revenue growth of just 1-4 per cent year-on-year in constant currency terms.

This guidance comes on the back of a miss in its FY26 outlook, where the company delivered 3.9 per cent growth against its earlier guidance of 4-4.5 per cent.

The services segment outlook also remained underwhelming, with expected growth of 1.5-4.5 per cent, lower than the 4.8 per cent recorded in FY26.

The earnings disappointment triggered a significant erosion in shareholder wealth, with the company's market capitalisation declining by approximately Rs 38,000 crore to around Rs 3.53 lakh crore.

For the March quarter, revenue stood at $3.7 billion, marking a 3.3 per cent sequential decline in constant currency and falling short of market expectations.

Management attributed the weak performance to several factors, including reduced discretionary IT spending by two major US telecom clients, cancellation of two SAP-related projects, and client-specific challenges in the retail and manufacturing sectors. These issues are expected to weigh on FY27 services growth by about 50 basis points. Additionally, the company flagged a softer demand outlook in Europe due to geopolitical uncertainties and estimated a 200-300 basis point deflationary impact from artificial intelligence on traditional IT services.

Brokerages responded with caution. Jefferies adopted the most bearish stance, downgrading the stock to "Underperform" and cutting its target price to Rs 1,165.

The brokerage expects FY27 organic revenue growth of 2.4 per cent, which would be the weakest since FY23, and reduced its valuation multiple amid concerns over slowing growth. It also noted that the stock trades at a premium to peers despite similar growth prospects.

Other firms echoed similar concerns. Citi maintained a "Neutral" rating but lowered its target price to Rs 1,385, citing weak revenue performance, subdued deal wins and sluggish forward indicators such as modest growth in deal bookings and headcount.

- IANS

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Reader Comments

P
Priya S
This is worrying for IT employees in India. If growth is slowing down and they're losing deals, hiring might freeze again. Already seeing less campus placements in my circle. Hope the management has a plan beyond blaming AI and US clients.
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Sarah B
As an investor, this hurts. I bought HCL at ₹1,500 thinking it was a safe bet. Now down 13% in one day. The AI deflation point is interesting though - maybe traditional IT services really are facing structural changes. Time to reassess my portfolio.
V
Vikram M
₹38,000 crore gone in a single day! That's more than the GDP of some smaller countries. The management should be held accountable for overpromising and underdelivering. When will Indian IT firms learn to be more conservative with guidance? 😤
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James A
The AI impact on traditional IT services is real and it's spreading fast. HCL's 200-300 bps deflation estimate might actually be conservative. I work in IT and see automation eating into manual work everywhere. India needs to reskill quickly or face serious job losses in this sector.
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Ananya R
I understand the market reaction, but selling at a loss now is foolish. HCL has strong fundamentals and a diverse client base. The European geopolitical issues are temporary. If you can hold for 2-3 years, this could be a buying opportunity. Just my two paise! 😊

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