HCL Technologies delivered a strong third-quarter performance for FY26, with shares trading 0.11% higher at ₹1,669.50 on Tuesday afternoon after recovering from an intraday low of ₹1,626. The IT services major's better-than-expected results and upgraded revenue guidance attracted buying interest from institutional investors despite mixed analyst recommendations.

Financial Performance Highlights

The company reported impressive financial metrics for Q3FY26, demonstrating robust growth across key parameters:

The reported profit after tax decline was attributed to a one-time provision of ₹956 crore related to new labour codes. Excluding this exceptional item, the adjusted PAT showed healthy growth of 4.4% year-on-year.

Strategic Partnership and Business Developments

HCL Tech announced a significant multi-year partnership with The Magnum Ice Cream Company, the world's largest ice cream company. Under this collaboration, HCL Technologies will design, build and manage future-ready IT infrastructure for the ice cream giant. The company will deploy its AI Force platform to embed artificial intelligence across TMICC's digital infrastructure, enabling a transition from AIOps to a NoOps operating model for fully autonomous IT operations.

Strong Deal Momentum and Revised Guidance

The company demonstrated robust deal momentum with total contract value bookings of $3 billion in the quarter, representing a substantial 43.5% increase year-on-year. A notable highlight was securing a $473 million five-year mega deal with a global retailer, underscoring the growing demand for AI-led transformation services.

Based on this strong performance, management raised the FY26 services revenue growth guidance to 4.75-5.25% from the earlier projection of 4-5%, reflecting confidence in continued business momentum.

Mixed Analyst Recommendations

Despite the strong quarterly performance, analyst opinions remained divided with varying target price recommendations:

Goldman Sachs cited stable-to-improving demand conditions in the IT sector for its target price increase. However, Kotak Institutional Equities maintained caution, arguing that the stock trades at a premium to peers at 23 times FY27 estimated earnings.

Dividend Declaration

The board declared an interim dividend of ₹12 per share, marking the company's 92nd consecutive quarter of dividend payout. This consistent dividend track record demonstrates the company's commitment to returning value to shareholders while maintaining financial discipline.

ICICI Securities has maintained its Hold rating on HCL Technologies with a target price of ₹1,590, following the company's strong quarterly performance that exceeded revenue expectations.

Strong Revenue Performance Beats Estimates

HCL Technologies delivered impressive revenue growth of 4.2% quarter-on-quarter in constant currency terms, significantly outperforming analyst expectations. The performance surpassed ICICI Securities' estimate of 2.2% and consensus estimate of 2.8%, demonstrating the company's resilient business momentum.

The strong revenue performance was primarily driven by robust growth in the software products business, which benefited from seasonal strength. Additionally, the company maintained healthy traction in its engineering research and development (ER&D) and IT services segments, despite facing seasonal headwinds from furloughs.

Robust Deal Momentum and Contract Wins

HCL Technologies reported exceptional deal performance with total contract value (TCV) reaching $3.00 billion, marking significant growth across multiple timeframes. The company achieved its highest-ever annual contract value (ACV) component, indicating strong client commitment and long-term business visibility.

The trailing twelve months TCV growth of 21% year-on-year positions HCL Technologies favorably to potentially report the highest growth among large-cap peers in FY27.

Market Dynamics and Emerging Opportunities

Management highlighted that traditional discretionary spending has experienced a slowdown in the current market environment. However, new opportunities are emerging in specialized areas, particularly in managing AI infrastructure and AI engineering services, which could drive future growth prospects.

Valuation and Investment Outlook

ICICI Securities maintains its Hold recommendation with a target price of ₹1,590, applying differentiated valuation multiples across business segments:

The brokerage's cautious stance reflects the mixed market dynamics, balancing the company's strong operational performance against broader industry challenges in discretionary spending.