HCLTech stock drop of nearly 10% on January 14 has raised alarms among investors, following the company’s third-quarter results that fell short of expectations. India’s third-largest software services provider saw its share price plummet, marking the most significant drop since September 2015. The decline came after the company reported a 5.1% rise in consolidated revenue, amounting to 298.9 billion rupees ($3.45 billion). While the growth seems positive, it missed analysts’ forecast of 300.68 billion rupees, primarily due to weak performance in the company’s software services division.
Analysts’ Response to HCLTech’s Stock Drop
Following the revenue miss, HCLTech’s stock was downgraded by at least 11 brokerages, with many lowering their target prices. The consensus among analysts is that the company’s underperformance in the software services sector and the slow ramp-up of certain deals have raised concerns about its future growth.
Despite these setbacks, CEO C Vijayakumar expressed confidence in an improved demand environment for 2025, which aligns with positive outlooks from competitors like Tata Consultancy Services. However, the lack of a strong revenue surge, coupled with revisions in the company’s growth guidance, has left analysts skeptical.
HCLTech’s Revised 2025 Growth Forecast and Market Concerns
In response to the Q3 miss, HCLTech revised its revenue growth forecast for fiscal year 2025, narrowing the range to 4.5%–5% from the earlier 3.5%–5%. The revision reflects the impact of recent acquisitions but still fell short of market expectations. Goldman Sachs noted that the company’s new guidance was slightly below their forecasts, particularly due to weak growth in the software division.
While HCLTech is expecting improvements, analysts suggest the company’s performance in its software services segment needs to accelerate to restore investor confidence.
HCLTech vs. Competitors Amid Stock Drop
In 2024, HCLTech outperformed its peers, with a 31% increase in stock value, far surpassing the 22% rise in the Nifty IT index. Its competitors, Tata Consultancy Services and Infosys, also posted gains of 8.5% and 22.5%, respectively. Despite outperforming the sector last year, HCLTech’s stock is now facing pressure, losing ground to competitors in recent trading.
HCLTech’s Path Forward: Can It Recover From the Stock Drop?
HCLTech’s ability to recover from its Q3 revenue miss will depend on how effectively it can address challenges in its software services division. Investors are closely watching for signs of stronger growth in this area as the company revises its revenue guidance for 2025. The company’s next steps will determine whether it can continue to attract investor confidence or if it will face prolonged uncertainty.