HCL Tech rises pre-earnings as analysts urge investors to wait

HCL Technologies shares climbed as much as 0.61% on Monday to an intraday high of ₹1,183, ahead of its first-quarter results for the period ending 30 June. The stock opened at ₹1,162, slightly below Friday's close of ₹1,164. However, the modest pre-earnings rally is being met with widespread caution from market analysts.

Brokerages are anticipating a mixed performance, with revenue growth expected to remain constrained. SMC Global Securities senior research analyst Seema Srivastava forecast a marginal sequential decline in revenue, citing weak discretionary technology spending and delayed client decisions. Axis Securities offered a slightly more optimistic view, projecting 3.5% quarter-on-quarter revenue growth, though it noted headwinds from specific client accounts and seasonal software weakness partially offset by rupee depreciation.

Analysts are divided on profitability. Srivastava expects sequential margin improvements driven by favorable currency movements, higher utilization, and cost controls, despite the drag of annual wage hikes and AI investments. Conversely, Axis Securities forecasts a 40 basis point quarterly drop in EBIT margins due to restructuring costs and increased investment.

Beyond the immediate numbers, investors are focused on HCLTech's artificial intelligence strategy. Srivastava highlighted that the market will be looking for updates on AI-led deal conversions, recent engagements with Neste and Nokia, and the integration of acquisitions like Finergic Solutions and an investment in Sarvam AI. “Management's commentary on GenAI monetisation, integration of recent acquisitions, margin sustainability, client spending outlook for the second half of FY27, and demand trends across the infrastructure, engineering, software and HCLSoftware businesses will remain key monitorables,” she added.

Given the conflicting signals, market professionals are advising against placing pre-result bets. Harshal Dasani, business head at INVasset PMS, warned that the risk-reward does not favour chasing the stock ahead of earnings, despite its status as a strong large-cap franchise. He suggested a staggered approach after the results provides a more favourable entry point.

Mahesh M Ojha, VP of research at Kantilal Chhaganlal Securities, echoed this defensive stance, pointing to the historical volatility IT stocks face around earnings. “It is better to wait for the results, assess the management's commentary on deal wins, demand outlook and margin guidance, and then consider buying. Entering after earnings offers greater clarity and helps reduce the risk associated with event-driven volatility,” Ojha said.