HCLTech Q2 Review: Strong AI Push Lifts Outlook — Buy, Sell Or Hold?
HCLTech Ltd.’s second-quarter revenue and operating income met estimates, with analysts largely bullish on the stock.
The management revised service revenue guidance to 4–5% (from 3–5%) while EBIT and revenue guidance were maintained.
The company net added employees, and attrition fell to 12.6%.
AI-Led Growth
The company expressed confidence in AI-led growth and noted that over $100 million in revenue came from advanced AI, with nearly all Q2 deals including AI.
This is a significant development, as Artificial+Intelligence+in+Indian+Stock+Market is expected to play a major role in the future of the IT services industry.
Analyst Ratings
Out of the 47 analysts tracking HCLTech, 21 have a ‘buy’ rating on the stock, 19 recommend a ‘hold’, and seven suggest a ‘sell’, according to Bloomberg data.
The average of 12-month analyst price targets is Rs 1,623, which implies a potential upside of 9%.
Macquarie has the highest price target of Rs 1,980, followed by Antique Stock Broking (Rs 1,775) and Phillip Securities (Rs 1,770).
Brokerage Views
CLSA reiterates ‘Outperform’ with price target cut to Rs 1,660 from Rs 1,663.
Continues to focus on an asset-light business model, in contrast to TCS+Stock+Analysis.
3-5% FY26 guidance band intact due to weakness in the software business.
Re-rating from current levels depends on the EBIT margin recovering.
Restructuring and AI to be overall revenue accretive.
Seeing significant scope for existing revenue cannibalisation due to AI.
Nuvama maintains ‘Hold’ and hikes price target to Rs 1,650 from Rs 1,630 earlier.
Valuations comparable to those of TCS+and+Infosys+Stock+Comparison, hence limited upside potential.
Sequential broad-based growth with improved margins.
Strong client interest with AI force now deployed in 47 accounts (versus 35 QoQ).
Wage hike cycle will commence in Q3 with a likely margin impact of 70–80 bps.
Motilal Oswal reiterates ‘buy’ with a price target of Rs 1,800.
The company is the fastest-growing in the large-cap IT services space.
All-weather portfolio remains the best large-cap bet in an uncertain macro environment.
Expect the company’s services business to grow at 4.5% constant currency.
Good beat on margins, but expect short-term pressure.
Emkay retains ‘Add’ on HCLTech with a price target of Rs 1,550.
Benefits from Project Ascend, and a weak rupee, were partly negated by restructuring costs.
Continued momentum in BFSI and operating performance.
Softness is seen in software revenue.
Investment Strategy
Given the strong AI push and revised service revenue guidance, investors may consider Investing+in+HCLTech+Stock for the long term.
However, it’s essential to consider the overall Indian+Stock+Market+Trends and Market+News+and+Analysis before making any investment decisions.
