HCL Tech Shares Rally Over 5% After Q2 Results; Brokerages Mixed

HCL Tech’s Q2 Performance Sparks Mixed Reactions Among Analysts

HCL Tech’s latest quarterly results reveal strong growth, but brokerages express varied outlooks.

Strong Earnings Amidst Mixed Market Sentiment

HCL Technologies has reported a notable 21.2% increase in net profit for the second quarter of FY27, reaching ₹5,132 crore, compared to ₹4,235 crore in the same quarter last year. Revenue also saw an impressive year-on-year growth of 11.5%, amounting to ₹35,620 crore. Sequentially, revenue rose by 3%, and net profit increased by 11%. This performance was bolstered by a total contract value (TCV) of $3.2 billion, which included a significant $1.14 billion deal with Mercedes-Benz.

Despite these strong figures, the stock experienced a mixed reaction in the market. HCL Tech shares initially surged over 5% following the results, reflecting investor optimism. However, by mid-morning trading, the stock was down 3.81% at ₹1,269.60, indicating volatility in investor sentiment.

Revised Guidance and Strategic Focus

HCL Tech has revised its revenue growth guidance, now expecting growth between 2.5% and 4% for the upcoming quarters, up from a previous range of 1% to 4%. This adjustment reflects the company’s confidence in its ongoing projects and the anticipated ramp-up of its recent mega deal, although management has cautioned about potential weaknesses in key telecom and manufacturing accounts.

The company’s focus on artificial intelligence (AI) is evident, with a reported annualized AI revenue of $876 million. HCL Tech is actively pursuing advancements in AI through strategic partnerships and the development of proprietary AI capabilities, which could enhance its service offerings and competitive edge in the market.

Brokerage Perspectives: A Divergent Outlook

Brokerage firms have expressed mixed views following HCL Tech’s Q2 results. Nomura has noted that the revenue growth was below expectations, leading to a cautious outlook. They have, however, increased their earnings per share (EPS) estimates for FY27 and FY28 by 2-3% and raised the target price from ₹1,310 to ₹1,330.

In contrast, 360 One Capital maintained a Hold rating, citing a mixed operating performance and a premium valuation that may limit upside potential. They have kept their target price at ₹1,220, reflecting a cautious stance on the stock’s near-term prospects.

Centrum, while maintaining a Buy rating, has slightly reduced its target price to ₹1,515 from ₹1,548, reflecting a cautious adjustment in their earnings estimates for the next few years. The firm highlighted the importance of HCL Tech’s AI initiatives but noted ongoing weakness in discretionary spending among certain clients.

Key Highlights

• HCL Tech’s Q2FY27 net profit rose 21.2% to ₹5,132 crore.
• Revenue grew 11.5% year-on-year to ₹35,620 crore.
• Revised revenue growth guidance now set at 2.5% to 4%.
• Total contract value includes a $1.14 billion deal with Mercedes-Benz.
• Brokerages express mixed views on stock performance and future outlook.

Investor Note: HCL Tech’s strong quarterly performance highlights its growth potential, particularly in AI. However, the mixed reactions from brokerages suggest that investors should remain cautious and closely monitor the evolving demand landscape in the IT sector.