Prabhudas Lilladher has issued a buy recommendation for HCL Technologies with a target price of ₹1,910, following the company's impressive third-quarter performance that exceeded analyst expectations across multiple business segments.

Strong Revenue Performance Beats Estimates

The company delivered robust revenue growth of 4.2% quarter-on-quarter in constant currency terms, significantly outperforming Prabhudas Lilladher's estimate of 3.0% QoQ growth. This strong performance was primarily driven by exceptional seasonality in the HCLSoftware segment, which recorded remarkable growth of 28.1% QoQ in constant currency terms.

Services Business Demonstrates Resilience

The services business showed remarkable resilience with 1.8% QoQ constant currency growth, effectively countering the typical impact of furloughs and holidays during the quarter. The ER&D segment emerged as a key growth driver, reporting another quarter of strong performance with 3.1% QoQ constant currency growth, compared to 2.2% QoQ growth in the previous quarter.

The growth momentum was largely supported by accounts outside the top 20, which grew by 2.3% QoQ, indicating strong decision-making and execution capabilities at the lower end of the client pyramid. Additionally, advanced AI revenue demonstrated impressive growth of 19.9% QoQ in constant currency terms, primarily comprising short-burst deals that validate the strong velocity of smaller transactions.

Significant Deal Wins and Order Book

HCL Technologies reported new deal Total Contract Value (TCV) of USD 3.00 billion for the quarter, which includes one mega deal worth USD 473.00 million representing a five-year strategic engagement. This substantial order book provides visibility for future revenue streams and reinforces the company's competitive positioning in the market.

Revised Growth Projections and Outlook

Based on the strong Q3 performance, Prabhudas Lilladher has revised its topline constant currency growth projections upward by 30 basis points for FY27E to 7.0% and by 20 basis points for FY28E to 7.7%. The brokerage expects service-led growth to continue its momentum in FY27 and FY28, supported by strong order wins and the growing AI revenue stream.

However, the research firm anticipates some margin normalization in Q4, with additional pressure from new labour codes expected to keep margins in check despite the margin beat achieved in Q3.

Valuation and Investment Recommendation

The stock is currently trading at 22x FY27E earnings per share and 19x FY28E earnings per share. Prabhudas Lilladher has assigned a 22x multiple to FY28 EPS to arrive at the target price of ₹1,910, reflecting confidence in the company's growth trajectory and market positioning in the technology services sector.

HCL Technologies shares gained momentum on Tuesday, rising nearly 2% following the company's third-quarter FY26 results announcement made on Monday. The Noida-based IT services firm's stock performance reflected investor response to the quarterly financial disclosure.

Q3 FY26 Performance Overview

The company reported a mixed performance for the third quarter of FY26, with management highlighting steady revenue growth alongside margin expansion. These key financial metrics provided a balanced view of the company's operational performance during the quarter.

Market Response

The stock's nearly 2% gain on Tuesday demonstrated positive market sentiment toward HCL Technologies' quarterly results. Investors appeared to focus on the company's ability to maintain steady revenue growth while simultaneously expanding margins, indicating operational efficiency improvements.

Company Background

HCL Technologies operates as a prominent IT services provider headquartered in Noida. The company's third-quarter results reflect its ongoing business operations and financial performance in the competitive information technology sector.