HCL Technologies reported ₹3,843 cr net profit (–9.7% YoY) for Q1 FY26, with revenue of ₹30,349 cr (+8.2%). Margins under pressure led to downgraded FY26 margin guidance, but revenue projection raised to 3–5%—find out the key takeaways and what investors should watch next.
📊 Quarter-at-a-Glance
- 🔻 Net Profit: ₹3,843 cr, down
10% YoY (Q1 FY25: ₹4,257 cr), missing analyst estimate (₹4,224 cr) Reuters+15mint+15mint+15The Times of India+6mint+6mint+6The Economic Times+3The Economic Times+3The Economic Times+3 - 📈 Revenue: ₹30,349 cr, up 8.1% YoY (₹28,057 cr), slightly above expectations The Economic Times+4mint+4The Economic Times+4
- 💸 Dividend: Interim dividend of ₹12/share declared HCLTech+4The Economic Times+4The Economic Times+4
- ⚙️ Operating Margin: Contracted to 16.3% (down ~80–170 bps YoY), driven by client bankruptcy impact & increased AI/GTM investments The Economic Times+14Reuters+14The Financial Express+14
- 📊 FY26 Guidance: Revenue growth raised to 3–5% YoY (prev 2–5%), margin trimmed to 17–18% vs prior 18–19% Reuters+9Reuters+9mint+9
🧭 What Drove the Numbers
- Revenue Beat – 8.2% YoY growth led by Tech & Services (+13.7% CC), telecom/media/retail also contributed. Strong growth in “Rest of World” (+15%) & Europe (+9.6%) PR Newswire.
- Profit Dip – Profit margin compressed due to:
- A one-off client bankruptcy (~20 bps hit)
- Increased spending on GenAI tools and AI‑led growth initiatives
- Delays in large deal ramps, leading to lower utilization The Economic Times+15The Financial Express+15NDTV Profit+15.
- Cash Strength – Cash generation strong: OCF/NI at 129%, FCF/NI at 121%; return on invested capital surged (ROIC 38.1%) PR Newswire+1HCLTech+1.
- Pipeline Update – Q1 deal bookings came in at $1.81 bn vs $1.96 bn YoY. Management confident of stronger deal flow in Q2 Reuters+1mint+1.
- Macro Environment – Tariff uncertainty, delayed client decision-making, and inflation headwinds impacting sector-wide performance .
📉 Stock & Market Reaction
- The stock dropped ~2–3% post-results, underperforming Nifty due to profit miss and margin downgrade .
- Jefferies upgraded to “Buy” with ₹1,850 target, citing long-term fundamentals despite short-term pressure The Economic Times.
🧠 Investor’s Outlook: Buy, Hold, or Wait?
🔹 Short-Term Traders
- 📍 Support Zone: Around ₹1,500–1,550
- Upside Target: Swift bounce to ₹1,700 possible; range breakout may trigger re-rate.
🔹 Long-Term Investors
- Positives: Strong cash flow, AI investments, growing digital & global demand, improved guidance.
- Concerns: Margin softness, lower utilization, and recent deal delays.
- Large-cap IT comparison: TCS outperformed on margin; HCL’s revenue growth strong but margins under pressure The Economic Times+13mint+13Reuters+13mint+1The Economic Times+1HCLTech.
❓ FAQs — HCL Technologies Q1 FY26
Q1. Why did profit fall despite revenue growth?
Profit fell ~10% due to one-off bankruptcy impact, higher utilization, and initial GenAI investments → margins down ~160 bps The Economic Times+6mint+6The Financial Express+6.
Q2. What’s the revised FY26 outlook?
Revenue growth expected at 3–5% YoY; margins projected at 17–18%, down from 18–19% forecast The Financial Express+7Reuters+7NDTV Profit+7.
Q3. Is now a good time to buy?
Some brokerages like Jefferies see dip as buying opportunity; long-term investors may appreciate AI and deal momentum, but margin pressures warrant caution The Economic Times.
Q4. How is HCL different from TCS and Infosys now?
HCL leads in revenue growth, but TCS holds margin advantage and better deal execution. Choice depends on preference for growth vs margin stability mint.
Q5. Does the Rs 12 dividend matter?
Yes—consistent dividend policy (~0.7% yield) underscores solid cash flow and shareholder-friendly stance .
⚠️ Disclaimer
This article is for informational purposes only and does not constitute financial advice. Consult a SEBI-registered advisor before making investment decisions.
Final Take
HCL Technologies delivered a mixed Q1: strong 8.2% revenue growth and improved guidance, but profit miss and margin cut reflect operational challenges and cautious macro. The dip presents a potential entry if you believe in its deal pipeline, AI momentum, and cash-rich model. However, margin recovery remains the key monitorable, especially versus peers.
