BENGALURU: HCL Technologies Ltd’s (HCLTech) weak growth outlook and client-specific challenges triggered a sharp investor selloff a day after its earnings announcement.
Shares of the country’s third-largest IT services company fell nearly 9.5% to ₹1,304 on Wednesday, marking their steepest intra-day decline in over a decade, according to a Mint analysis.
The reaction puts HCLTech alongside Tata Consultancy Services Ltd (TCS) and Wipro Ltd, whose shares also declined after recent earnings, as all three companies flagged growth pressures with two of them ending the last fiscal year with a revenue decline.
HCLTech clocked a 5.95% year-on-year rise in revenue to $14.66 billion for FY26, beating Bloomberg estimates, but net profit fell 4.05% to $1.96 billion. TCS and Wipro, meanwhile, reported revenue declines of 0.54% and 0.32%, underscoring the broader slowdown across large IT services firms.
Despite the topline growth, investors focused on HCLTech’s miss on its full-year guidance and a weaker outlook for FY27, which drove the selloff. The company fell short of its earlier 4-4.5% constant currency growth forecast.
The miss was led by its products business.
“Products business decline of 4.1% y-y (in constant currency) led to the miss. Services growth was impacted in 4Q due to reduction in discretionary spend by telco clients and discontinuation of two SAP programs,” said Nomura analysts Abhishek Bhandari and Karan Nain, in a note dated 21 April.
Revenue from software products, which contribute about a tenth of total sales, fell 2.8% year-on-year to $1.39 billion.
Muted guidance, rising pressures
More concerning for investors was the outlook. HCLTech guided for 1-4% growth in constant currency for the current fiscal, below the 2-5% range it had indicated a year earlier, and signalled a slow start to the year.
Brokerages said the guidance factored in both demand uncertainty and emerging structural pressures.
“The FY27E guidance was also lower vs expectations; the 1.5-4.5% YoY CC services growth guidance factors in continued stress at the lower end and the higher end factors in a moderate pickup in discretionary spend and large deals materializing in H1. The guidance incorporates an AI-led deflationary impact of 2-3%, a 50bps growth headwind from client-specific challenges,” HDFC Securities analysts Amit Chandra, Vinesh Vala, and Maitreyee Vaishampayan said in a note dated 22 April.
Artificial intelligence (AI) is emerging as a near-term headwind. HCLTech expects AI-driven efficiencies to compress industry revenue by 3-5%, with a 2-3% impact on its own portfolio.
The company reported annualized advanced AI revenue of $620 million and is targeting 25-30% growth in AI-native services, which include agentic AI, AI factories, and physical AI offerings.
Some brokerages, however, believe the company is relatively resilient to AI-led deflation.
“Near-term performance is impacted by a mix of client-specific issues and early-stage AI deflation, and the interplay remains a key monitorable. That said, HCLT’s exposure to ER&D, chip design, and infrastructure management makes it relatively more resilient vs. application-heavy peers,” said Motilal Oswal Financial Services analysts Abhishek Pathak and Keval Bhagat in a note dated 21 April.
Engineering and R&D services account for nearly a fifth of HCLTech’s revenue, providing some cushion against AI-led pricing pressure.
The broader trend across large IT services firms remains weak.
Shares of Wipro fell about 3% a day after its 16 April results, despite announcing a ₹15,000 crore buyback, as the company reported a third consecutive year of revenue decline to $10.48 billion.
A week earlier, TCS shares dropped about 5% within two days of its earnings, after the company posted its first annual revenue decline since listing in 2004, with revenue slipping 0.54% to $30.08 billion.