HCL Tech Shares Jump 7% After In-Line Q4; Brokerages Maintain Neutral Ratings

HCL Technologies, India’s third-largest IT services company by market capitalisation, witnessed a significant surge in its stock price on April 23, 2025, following the announcement of its Q4 FY25 (January–March 2025) results. The stock rallied over 7% to ₹1,589.95 on the Bombay Stock Exchange (BSE), emerging as the top gainer among BSE Sensex and National Stock Exchange (NSE) Nifty constituents. This marked the stock’s biggest intraday gain since September 14, 2019, according to Bloomberg. The results, broadly in line with analyst expectations, prompted brokerages like Citi, Morgan Stanley, and Nuvama to maintain neutral to cautiously optimistic ratings, with some revising target prices. Despite a cautious management outlook and softer deal wins, HCL Tech’s FY26 revenue guidance slightly exceeded estimates, fueling the rally. This article delves into the Q4 performance, brokerage reactions, market sentiment, and the broader implications for HCL Tech and the Indian IT sector.

Q4 FY25 Financial Performance: Meeting Expectations

HCL Technologies reported an 8.1% year-on-year (YoY) increase in consolidated net profit for Q4 FY25, reaching ₹4,307 crore, up from ₹3,986 crore in Q4 FY24. Revenue from operations grew 6% YoY to ₹30,246 crore, compared to ₹28,499 crore in the same quarter last year. On a sequential basis, revenue rose 1%, while net profit declined 6% quarter-on-quarter (Qoq), reflecting seasonal weaknesses in the Products and Platforms (P&P) segment. The company’s Earnings Before Interest and Taxes (EBIT) margin stood at 18.3%, within the guided range of 18–19%, though it contracted 60 basis points Qoq due to wage hikes and P&P seasonality.

In constant currency (CC) terms, revenue grew 0.2% Qoq, aligning with the company’s full-year guidance of 4.5–5% for FY25. The IT and Business Services segment grew 0.7% sequentially and 2.7% YoY, driven by demand in digital transformation and cloud services. The Engineering and R&D Services (ERS) segment also performed well, supported by contributions from the HPE acquisition. However, the P&P segment saw a 14% Qoq decline, a seasonal trend noted by analysts at ICICI Securities.

HCL Tech reported a new deal Total Contract Value (TCV) of $3 billion, a strong figure driven by AI-led offerings and its integrated go-to-market strategy. However, TCV was down 5% YoY, signalling softer deal momentum compared to previous quarters. The company declared an interim dividend of ₹18 per share, reinforcing its attractiveness to income-focused investors with a dividend yield of over 4.2%.

For the full year FY25, HCL Tech’s revenue rose 6% to ₹1,17,055 crore, with CC revenue up 4.7%. Net profit climbed 11% to ₹17,390 crore, reflecting robust execution despite macroeconomic challenges. “We have delivered another year of robust growth with a future-ready portfolio,” said Roshni Nadar, Chairperson, HCL Tech, in a statement.

Brokerage Reactions: Neutral Ratings with Mixed Outlooks

Brokerages largely maintained neutral ratings on HCL Tech, acknowledging the in-line Q4 performance but flagging concerns about macroeconomic uncertainties and softer deal wins. Below is a detailed breakdown of key brokerage perspectives:

• Citi: Citi retained a “Neutral” rating with a target price of ₹1,510, down from ₹1,615, citing a “decent” Q4 performance in a seasonally weak quarter. The brokerage noted that HCL Tech outperformed peers like Infosys and Tata Consultancy Services (TCS) in certain metrics, such as services growth. However, it trimmed FY26 and FY27 earnings per share (EPS) estimates by 2% each, reflecting expectations of slower growth due to an uncertain environment. Citi highlighted the strong $3 billion TCV but noted the 5% YoY decline as a concern.
• Morgan Stanley: Morgan Stanley assigned an “Equal-Weight” rating with a target price of ₹1,600. The brokerage praised HCL Tech’s FY26 CC revenue growth guidance of 2–5%, which was slightly ahead of consensus estimates. However, it cautioned that discretionary spending pressures across verticals, particularly in retail and telecom, could impact growth. Morgan Stanley viewed HCL Tech as a preferred pick among large-cap IT stocks, alongside Infosys.
• Nuvama: Nuvama took a more bullish stance, upgrading HCL Tech from “Hold” to “Buy” with a target price of ₹1,700. The brokerage cited the stock’s attractive valuation after a 23% year-to-date correction, offering a high dividend yield of 4.2%. Nuvama maintained its FY26 and FY27 projections, valuing the stock at 23x FY27 P/E, and noted that HCL Tech’s outperformance relative to peers justified the upgrade.
• Nomura: Nomura maintained a “Neutral” rating but reduced its target price to ₹1,670 from ₹1,840, citing rising macroeconomic uncertainties. The brokerage cut FY26–27 EPS estimates by 2%, reflecting lower revenue and margin assumptions. Nomura described the Q4 results as a “mixed bag,” with strong deal wins offset by weaker growth guidance.
• Jefferies: Jefferies retained a “Hold” rating, lowering its target price to ₹1,490. The brokerage highlighted the positive FY26 guidance and strong deal wins but noted potential headwinds from tariff concerns and discretionary spending pressures. Jefferies expects HCL Tech to face challenges in Q4 due to a planned scale-down in a telecom deal and delays in discretionary projects.
• InCred: InCred downgraded HCL Tech from “Add” to “Hold,” reducing its target price to ₹1,585 from ₹2,021. The brokerage cited the stock’s full valuation at 28.5x FY26 P/E and the availability of peers like Infosys at a discount. InCred acknowledged HCL Tech’s strong pipeline but flagged softer Q4 growth expectations.

According to Bloomberg data, out of 46 analysts covering HCL Tech, 22 recommended “Buy,” 16 suggested “Hold,” and 8 advised “Sell.” The average target price stood at ₹1,650, implying a modest upside from the closing price of ₹1,577 on April 23, 2025.

Market and Investor Sentiment

The 7% surge in HCL Tech’s stock price reflected investor optimism about the company’s in-line results and slightly better-than-expected FY26 guidance. The stock rose to ₹1,590 per share, snapping a one-day decline and continuing a 21% recovery from its low of ₹1,302 earlier in April 2025. Despite the rally, the stock remained down 17.4% year-to-date, underperforming the Nifty 50 index, which gained 2.9% in the same period.

Posts on X captured mixed sentiments. Some users, like @nimeshscnbc, highlighted Jefferies’ view that HCL Tech’s deal wins and FY26 guidance were positives, despite tariff concerns. Others, such as @moneycontrolcom, emphasised the neutral brokerage ratings and the stock’s strong performance relative to peers. Retail investors on X viewed the correction as a buying opportunity, citing HCL Tech’s high dividend yield and leadership in digital and AI offerings. However, some expressed caution due to global uncertainties and softer TCV growth.

The broader Nifty IT index rallied 3% post-HCL Tech’s results, reflecting positive spillover effects. Peers like Wipro and Tech Mahindra also saw gains, though their Q4 results were less robust. HCL Tech’s market capitalisation rose to ₹4.2 trillion, reinforcing its position among India’s top IT firms.

Factors Driving the Stock Rally

Several factors contributed to the 7% jump in HCL Tech’s stock price:

1. In-Line Q4 Results: The 8.1% YoY profit growth and 6% revenue increase met analyst expectations, providing stability in a volatile IT sector. The company’s ability to maintain EBIT margins within guidance reassured investors.
2. Optimistic FY26 Guidance: HCL Tech’s FY26 CC revenue growth guidance of 2–5% was slightly ahead of consensus estimates of 1–4%. This signalled confidence in sustained demand for digital, cloud, and AI services.
3. Strong Deal Wins: The $3 billion TCV, driven by AI-led propositions, underscored HCL Tech’s competitive edge in emerging technologies. Strategic partnerships and acquisitions, such as HPE, bolstered growth prospects.
4. High Dividend Yield: The ₹18 per share interim dividend and a yield of 4.2% attracted income-focused investors, especially after the stock’s 23% YTD correction.
5. Peer Outperformance: Compared to peers like Infosys, which reported flat growth, and TCS, which faced margin pressures, HCL Tech’s results appeared resilient, boosting investor confidence.

Challenges and Risks Highlighted by Brokerages

Despite the positive market reaction, brokerages flagged several risks:

• Macroeconomic Uncertainties: Management’s cautious tone, echoed by CEO C Vijayakumar, highlighted global economic challenges, including inflation and potential tariff pressures. These could curb discretionary spending in key verticals like retail and telecom.
• Softer Deal Momentum: The 5% YoY decline in TCV raised concerns about deal pipeline strength. Analysts at Citi noted that new deal wins need to accelerate to sustain growth in FY26.
• Margin Pressures: The 60-basis-point Qoq EBIT margin decline, driven by wage hikes and P&P seasonality, could persist if cost pressures intensify. JM Financial expects margins to remain at the lower end of guidance in Q4.
• Valuation Concerns: At 28.5x FY26 P/E, HCL Tech trades at a premium to peers like Infosys (25x) and Wipro (22x). InCred argued that this limits upside potential, especially with softer Q4 growth expectations.
• Sectoral Headwinds: The IT services sector faces challenges from slower client decision-making and elongated budget cycles, as noted by Emkay. HCL Tech’s exposure to discretionary projects could be a vulnerability.

Management Commentary and Strategic Focus

CEO C Vijayakumar emphasised HCL Tech’s resilience in navigating short-term challenges while positioning for medium-term opportunities. “The strength of our execution positions us well to capture opportunities emerging from global uncertainties,” he said. The company is doubling down on AI, cloud, and digital transformation, with investments in its AI-led offerings and global delivery model. Vijayakumar highlighted the $3 billion TCV as evidence of client confidence in HCL Tech’s capabilities.

For FY26, HCL Tech expects revenue growth of 3–5% in CC terms, including a 100-basis-point contribution from the CTG acquisition. The EBIT margin guidance of 18–19% remains unchanged, reflecting disciplined cost management. The company also plans to maintain its aggressive hiring strategy, targeting 20,000 freshers in FY26 to support its expanding digital and engineering services portfolio.

Implications for HCL Tech

The Q4 results and stock rally underscore HCL Tech’s ability to deliver steady performance in a challenging environment. However, the company faces several imperatives:

1. Accelerating Deal Wins: Sustaining the $3 billion TCV momentum is critical to achieving FY26 growth targets. Expanding partnerships in BFSI, hi-tech, and healthcare will be key.
2. Margin Management: Balancing investments in AI and talent with cost discipline will be essential to maintain EBIT margins within guidance. Analysts expect margin recovery in FY26 as P&P seasonality subsides.
3. Navigating Macro Risks: HCL Tech must mitigate the impact of tariff concerns and discretionary spending cuts through diversified offerings and non-discretionary services like cloud and cybersecurity.
4. Enhancing Investor Confidence: Clear communication on deal pipelines and growth drivers will be crucial to sustain the stock’s momentum, especially after a volatile FY25.

Broader Industry Context

HCL Tech’s Q4 performance reflects broader trends in the Indian IT sector. Peers like Infosys and TCS reported mixed results, with demand for digital transformation and cloud services offset by weakness in discretionary projects. The sector is grappling with macroeconomic headwinds, including high interest rates and geopolitical tensions, which have slowed client decision-making. However, long-term trends such as AI adoption, Industry 4.0, and cloud migration offer growth opportunities.

Accenture, a global competitor, recently lowered its revenue guidance, citing cautious client behaviour, which underscores the sector’s challenges. Indian IT firms, including HCL Tech, benefit from cost-competitive delivery models and strong client relationships, positioning them to capture market share. HCL Tech’s focus on AI and digital engineering aligns with industry shifts toward software-defined solutions and smart infrastructure.

Conclusion

HCL Technologies’ 7% stock surge on April 23, 2025, following its Q4 FY25 results, reflects investor optimism about its in-line performance and slightly upbeat FY26 guidance. The 8.1% YoY profit growth, 6% revenue increase, and $3 billion TCV underscored the company’s resilience, despite softer deal momentum and margin pressures. Brokerages like Citi, Morgan Stanley, and Nuvama maintained neutral to bullish ratings, with target prices ranging from ₹1,510 to ₹1,700, citing HCL Tech’s strong pipeline and dividend yield. However, macroeconomic uncertainties, discretionary spending risks, and valuation concerns temper the outlook.

For investors, HCL Tech presents a balanced opportunity. The stock’s correction and high dividend yield make it attractive for long-term holders, while near-term volatility warrants caution. As HCL Tech navigates global challenges and doubles down on AI and digital transformation, its ability to sustain deal wins and margins will determine its trajectory in FY26. The rally signals confidence in HCL Tech’s fundamentals, but sustained execution will be key to maintaining investor trust in a dynamic IT landscape.