HCL Technologies delivered a robust Q3 performance with significant operational improvements, yet brokerages maintain a measured outlook on the stock's near-term prospects. The company's shares closed at ₹1,667.00 on Monday, gaining 0.34%, though the stock remains down over 16% for the past year, underperforming the broader market.

Strong Operational Performance Drives Confidence

The company's Q3 results showcased substantial improvements across key metrics. HCL Technologies achieved a remarkable 43% year-on-year jump in trailing twelve-month deal TCV, demonstrating strong client engagement and business momentum.

The company upgraded its services revenue growth guidance for FY26 to 4.75-5.25% in constant currency, positioning HCL Tech at the upper end of the peer group. This guidance revision reflects management's confidence in sustained business momentum and improved earnings visibility.

Mixed Brokerage Sentiment Despite Fundamentals

Brokerages acknowledged the strong operational execution while maintaining cautious recommendations due to valuation and seasonal considerations.

Citi raised FY27-FY28 earnings estimates by 2% while noting the company's rising headcount and management focus on identifying new spend areas. HSBC highlighted that operating margins are trending towards 18-19% in FY27, with a 5-6% medium-term revenue CAGR appearing achievable.

Seasonal Headwinds Temper Enthusiasm

Despite strong fundamentals, several factors contribute to brokerage caution. CLSA pointed out that even at the upper end of guidance, Q4 implies negative sequential growth in constant currency, largely due to seasonal weakness in the products business.

Historical performance patterns also influence sentiment, with CLSA noting that HCL Tech stock has traditionally delivered weak returns between Q4 and Q2, compared with strong gains in the Q2-Q3 period.

AI-Led Services Strategy Emerges as Key Differentiator

The company's AI-focused, services-led growth strategy stands out as a significant positive factor. Nomura's bullish stance, with a Buy rating and ₹1,810.00 target price implying nearly 9% upside, specifically cited the asset-light, services-centric AI push as structurally positive.

This strategic positioning in AI-led services is viewed as a key growth driver that could differentiate HCL Technologies from peers in the medium term, with margins expected to normalize favorably in FY27.

HCL Technologies reported mixed financial results for Q3FY26, with net profit declining despite strong revenue growth. The IT services major's consolidated net profit fell 11% year-on-year to ₹4,076 crore, down from ₹4,591 crore in the corresponding quarter of the previous year.

Financial Performance Overview

The company's financial performance for Q3FY26 showed contrasting trends in profitability and revenue metrics:

Despite the decline in bottom line, HCL Technologies demonstrated robust top-line growth with revenue from operations increasing 13% year-on-year to ₹33,872 crore. On a sequential basis, revenue grew 6% from ₹31,942 crore reported in Q2FY26.

Operational Highlights and Dividend Declaration

HCL Technologies reported strong operational metrics during the quarter. The company achieved net new deal wins totaling approximately $3 billion, representing a significant 44% year-on-year increase. Revenue performance in constant currency terms showed 4.2% sequential growth and 4.8% year-on-year growth, exceeding street estimates.

The company declared an interim dividend of ₹12 per equity share for FY26, with the record date fixed as January 16, 2026, and payment scheduled for January 27, 2026.

Segment-wise Performance

The company's diverse business segments showed varied performance during Q3FY26:

The software segment particularly stood out with a surge of 28% quarter-on-quarter to $425 million, exceeding market expectations. Revenue from Advanced AI reached $146 million, marking 19% sequential growth and highlighting the company's strong positioning in artificial intelligence solutions.

Brokerage Recommendations and Target Prices

Leading brokerages maintain positive outlook on HCL Technologies despite the profit decline:

Nomura maintained its 'buy' rating while raising the target price to ₹1,810. The brokerage noted that HCL Technologies' EBIT margin stood at 18.6%, up 120 basis points quarter-on-quarter but down 90 basis points year-on-year, exceeding consensus estimates of 18.2%.

Market Outlook and Growth Prospects

Brokerages highlighted several positive factors supporting their recommendations. Goldman Sachs noted that the demand environment appears stable to improving, with the BFSI vertical remaining strong and early signs of recovery in other verticals. The firm raised its EBIT estimates for HCL Technologies for FY26-FY28 by up to 3%.

Choice Broking emphasized the company's strong performance driven by rising demand for AI-powered solutions and digital transformation programs. The brokerage expects HCL Technologies' revenue, EBIT, and PAT to grow at a CAGR of 11.5%, 11.8%, and 10.1% respectively over FY25-FY28E. The company has also expanded its AI ecosystem through partnerships including the NVIDIA Physical AI Lab and deeper collaboration with AWS for BFSI-focused AI innovation.