HCL Tech Q1 Preview: Muted Profit Outlook, Seasonal Weakness; Guidance & Deals in Focus

India’s third-largest IT company HCL Technologies will announce its Q1 FY26 results on July 14. Analysts expect flat to marginal growth in revenue and profit, impacted by seasonal softness and persistent global uncertainties. Focus will remain on FY26 revenue guidance, EBIT margins, large deal TCVs, and commentary on discretionary spending and AI-driven opportunities.

Muted Profit Growth Expected Amid Seasonal Headwinds

HCL Technologies is expected to post marginal quarterly growth in both revenue and adjusted PAT for the June quarter (Q1 FY26), consistent with historical trends that show seasonal softness during this period. The impact is expected to be more pronounced this year amid uncertainty from US reciprocal tariffs and sluggish discretionary IT spending. While revenue is expected to rise 7–9% YoY, QoQ growth could remain flat or even negative, say analysts.

Brokerages broadly expect constant currency (CC) revenue to decline 0.4–0.9% QoQ, with cross-currency tailwinds of 200–230 basis points keeping reported revenue growth marginally positive. The products and platforms (P&P) segment and IT services business are both expected to show weakness, while engineering and R&D (ER&D) services may face volume pressure due to subdued client demand.

Highlights

• Phillip Capital: Revenue +8.7% YoY, +0.8% QoQ; PAT +2.2% YoY, +1.1% QoQ; expects CC revenue decline of 0.4% QoQ.

• Motilal Oswal: Revenue +7.2% YoY, -0.7% QoQ; adjusted PAT +0.4% YoY, -0.7% QoQ.

• Kotak Equities: Expects 0.8% QoQ CC revenue decline in both services and P&P segments.

• Equirus Securities: Revenue +7.8% YoY, flat QoQ; recurring PAT +0.4% YoY, -0.7% QoQ; expects CC revenue to dip by 0.9% QoQ.

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Margins to Decline Sequentially; Seasonal Reset, Tariff Concerns Weigh

Across the board, EBIT margins are expected to decline 50–77 basis points QoQ, in line with Q1 seasonal trends and the impact of productivity pass-backs, typically seen in the first quarter. However, on a YoY basis, EBIT margins may improve by 20–68 bps, aided by cost optimization, automation benefits, and operational efficiencies.

Most analysts see EBIT margins settling in the 18–19% range, aligning with the company’s FY26 margin guidance. Kotak, in particular, emphasized the challenges in hitting the aspirational 19–20% EBITM band, given the subdued environment.

Highlights

• Phillip Capital: EBITDA margin may fall 10bps QoQ, rise 68bps YoY.

• Motilal Oswal: EBITDA margin seen at 21%, up from 20.6% YoY.

• Kotak: EBIT margin down 60bps QoQ, up 20bps YoY.

• Equirus: EBITM to decline 77bps QoQ due to seasonal drag.

FY26 Guidance: Revenue Band May Be Narrowed, Margins Likely Unchanged

A key area of investor focus will be HCL Tech’s FY26 revenue growth guidance, currently at 2–5% YoY in constant currency. While Kotak and Equirus expect this to be retained, Phillip Capital believes the company may narrow it to 3–5%, citing better pipeline visibility.

Analysts broadly expect no change to the EBIT margin guidance, which stands at 18–19% for the fiscal year. However, any commentary suggesting a shift in strategy, customer demand, or changes in the deal pipeline could influence the outlook.

Key Analyst Commentary

• Revenue Guidance: Likely retained at 2–5%; Phillip Capital expects narrowing to 3–5%.

• Margin Guidance: To stay within 18–19% band; concerns exist over achieving the upper range.

• Deal TCV: Kotak projects strong wins between $2–2.5 billion in Q1FY26.

• AI & GenAI: Updates on adoption trends and their impact on project margins will be closely watched.

• ER&D Outlook: Demand outlook for engineering and R&D services will be a key area of interest.

Focus Areas for Investors Ahead of Earnings

Investors and analysts will be closely monitoring management commentary on a range of strategic and operational parameters:

• Impact of US Tariffs on retail and manufacturing IT clients.

• Nature of large deals and visibility in the pipeline.

• Status of discretionary tech spending, particularly in BFSI and manufacturing.

• Adoption of enterprise GenAI, margin opportunities, and business deflation risks.

• Acquisition Strategy and any new capital allocation updates.

• Geographical performance, especially Europe and North America.

Analyst Verdict: While the Q1 FY26 numbers may underwhelm due to seasonality and global demand pressures, investors will be more focused on the forward-looking guidance, large deal momentum, and margin visibility for FY26, which could determine the medium-term trajectory for HCL Tech stock.

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