HCL Tech shares gain 3% despite muted Q2. Should you buy, sell, or hold the stock?

India's third-largest IT services company, HCL Technologies, saw its shares rally as much as 3% to a day’s high of Rs 1,535 on the NSE on Tuesday, October 14, even as the company reported a flat Q2 net profit of Rs 4,235 crore, unchanged from the year-ago period.

The profit after tax (PAT) attributable to shareholders was in line with Street expectations of Rs 4,231 crore.

The revenue from operations stood at Rs 31,942 crore, up 11% over Rs 28,862 crore posted in the corresponding quarter of the last financial year. HCL Tech's bottomline grew over 10% on a sequential basis from Rs 3,843 crore reported in Q1FY26, while its topline increased by 5.2% over Rs 30,349 crore in the April-June quarter.

The company's board of directors also declared an interim dividend of Rs 12 per equity share for the financial year 2025-26.

What should investors do?

Citi maintains a Neutral rating on HCL Technologies with a target price of Rs 1,600, a 7% upside from current levels. While strong deal wins supported performance, software revenue declined YoY, and wage hikes could pressure margins. Citi continues to prefer HCL Tech and Infosys over TCS, though it notes risks from competition and macroeconomic headwinds.

Morgan Stanley maintains an Equal Weight rating on HCL Technologies with a target price of Rs 1,680. The company reported strong deal wins worth $2.6 billion and reaffirmed its FY26 services growth guidance at 4-5%, with an EBIT margin of 17.5% (~18% excluding restructuring). AI-led services revenue has reached $100 million quarterly, with 47 clients adopting the AI Force platform and a target of 100 clients by the end of FY26.

HCL Tech continues to follow an asset-light strategy focused on differentiated IPs rather than data center assets. Morgan Stanley expects FY26 to remain an AI investment year, with gradual margin recovery through FY27, guiding margins to 17.6% and steady-state levels of 18-19% by April 2026. The firm keeps its TP and EPS estimates unchanged, noting that upside appears capped after recent outperformance.

Goldman Sachs maintains a Neutral rating on HCL Technologies with a higher target price of Rs 1,620 (from Rs 1,530 earlier). Share gains in key renewals point to company-specific strength rather than a broad industry rebound. However, Goldman notes that some deal declines linked to AI productivity gains could weigh on sector valuations. HCL Tech has raised its FY26 services growth guidance to 4–5%, with expectations closer to 5.1%.

Nuvama, with a price target of Rs 1,650 per share, also has a Hold call on the counter. It says that valuations remain in line with peers, prompting a slide upward revision in the target price.

On the contrary, MOSL maintains a Buy rating on HCL Technologies with a revised target price of Rs 1,800 (up from Rs 1,750). The brokerage expects revenue, EBIT, and PAT to grow 10.2%, 4.5%, and 10.2% YoY, respectively, in 2HFY26. MOSL calls HCL Tech the best large-cap bet in an uncertain macro environment, highlighting beats on both revenue and margins. The company has raised its IT services growth guidance to 4–5% YoY in constant currency (from 3–5%). It is also seen as the first major IT firm to disclose AI-related revenue, positioning it well for 2HFY26 growth. MOSL forecasts USD revenue and PAT CAGR of 5.3% and 7.2% over FY25–27.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)