HCL Tech drops 3% despite record deal wins and AI growth
HCL Technologies reported a 20% profit surge and record AI-driven deal bookings, but unchanged full-year guidance sent the stock down 3%.
HCL Technologies shares fell more than 3% to ₹1,183.00 on Tuesday despite the Indian IT firm posting a 20.3% year-on-year increase in first-quarter net profit to ₹4,626 crore. The drop extends a steep downward trajectory for the stock, which has lost 28% over six months and sits far below its 52-week high of ₹1,770.
Underlying operational metrics showed genuine strength. Revenue grew 14% year-on-year to ₹34,579 crore, while EBIT margins expanded 39 basis points sequentially to 16.9% even after absorbing 62 basis points of restructuring costs. The standout metric was new deal bookings, which hit a record $2.4 billion for the first quarter, fueled by a 62.1% year-on-year surge in the Advanced AI business to $171 million.
Despite these positives, the board retained its conservative fiscal year 2027 guidance. The company continues to project constant currency revenue growth of just 1% to 4% and EBIT margins between 17.5% and 18.5%. The unchanged forecast, combined with an interim dividend of ₹12 per share, did little to reverse the negative sentiment surrounding the stock.
However, analysts see significant unrecognised upside. Elara Securities upgraded the stock to "Accumulate" from "Sell" and raised its target price to ₹1,310 from ₹1,200. The brokerage highlighted that a $1.14 billion mega deal signed in July is excluded from the company's current revenue guidance.
"We recorded our highest-ever Q1 net-new bookings of $2.4 billion, and our advanced AI business grew 10.6% QoQ and 62.1% YoY in constant currency terms," said CEO C Vijayakumar. "These demonstrate that enterprises are choosing us to lead their AI-led transformation."
HCL Tech is pushing to establish a first-mover advantage in the AI infrastructure space. The firm is investing ₹35 billion to build 50 MW of data centre capacity and backing Sarvam AI for frontier models, though Elara noted future investments remain contingent on returns. "Combined with the operational efficiencies visible in margin expansion, this momentum gives us the confidence we're positioned to keep outpacing the market over the medium term," Vijayakumar added.
Elara now projects US dollar revenue growth of 3% for fiscal 2027 and 4% for 2028, driving a 6% to 8% upgrade to its earnings estimates. The divergence between the stock's recent weakness and the company's foundational AI investments presents a clear valuation debate for institutional investors.
