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Investing.com -- HCL Tech raised its revenue growth guidance for the fiscal year on confidence in client demand despite a weaker first-quarter profit. Jefferies upgraded the stock to Buy on expectations of stronger long-term momentum.
The IT services firm now expects constant-currency revenue to grow between 3% and 5% in 2026, the highest outlook among India’s top five software exporters.
But the company also trimmed its margin forecast by a full percentage point, to 17–18%, after a steeper-than-expected decline in profitability.
Jefferies said the upgraded growth guidance reflects increased visibility, including deeper wallet share at a large financial services client, while recent investments in AI capabilities and sales expansion are likely to fuel stronger earnings growth over the next three years.
First-quarter revenue rose 1.3% sequentially to $3.5 billion, aided by currency gains.
But operating margins slipped sharply by 170 basis points to 16.3%, with Jefferies citing lower software sales, delayed ramp-ups and a client bankruptcy among the contributors.
Despite the near-term profitability miss, the brokerage expects HCLTech to deliver a 10% compound annual growth in earnings between FY26 and FY28, leading the sector, on the back of steady top-line gains and a return to 18% margins in the outer years.
Jefferies raised its price target to ₹1,850 from ₹1,700, implying a modest valuation premium to peers like TCS and Infosys (NSE:INFY).
“Superior growth outlook,” similar cash conversion and higher payouts should support a premium, according to the analysts.