HCL Technologies shares emerged as the top gainer in both benchmark indices, Sensex and Nifty 50, with the stock closing 3.68% positive at ₹1,159 on Tuesday following the AI investment announcement. As per The Hindu BusinessLine, the stock hit an intraday high of ₹1,161.90 during trading, building on the previous session's 4% jump to ₹1,145.70. The largecap IT stock has gained 12% in one month but has risen only 1% in six months, with the stock declining 13% on a year-to-date basis and 8% in one year. However, HCL Tech shares have delivered strong long-term returns, jumping 51% in three years and 107% in five years. According to The Economic Times, the NIFTY50 touched the session's peak of 24,002.60 on June 16, with the SENSEX gaining 562.45 points or 0.74% to close at 76,826.78. Shareholders welcomed the Sarvam AI announcement, sending HCLTech shares up 2.1% during trading hours on Tuesday despite broader AI-led assault on IT shares that have plunged on fears of automation rendering IT services obsolete.
HCLTech has made its first major investment in an Indian sovereign AI startup, investing ₹1,427.25 crore for a 10.46% stake in Sarvam AI as part of the company's strategic AI expansion. According to The Hindu BusinessLine, this investment is part of Sarvam's latest $300 million Series B fundraise, the first close at a post-money valuation of $1.5 billion. The transaction involves HCLTech acquiring 41,421 equity shares in an all-cash deal, with the remaining investment in the round led by Bessemer Venture Partners, with continued participation from existing investors Khosla Ventures and Peak XV Partners. As reported by The Hindu BusinessLine, Morgan Stanley maintained its 'equal-weight' rating on HCLTech with a target price of ₹1,410, noting the investment could provide strategic advantage in the sovereign AI space, particularly among governments and regulated enterprises globally. Nomura Research pointed out that this is the first-of-its-kind investment by any Indian IT services company in a sovereign AI company, with analysts Abhishek Bhandari and Karan Nain maintaining a 'Buy' rating on the stock with a target price of ₹1,600. Sarvam AI, a Bengaluru-based startup specializing in AI models in Indian languages, reported revenue of ₹45.1 crore in FY26, up from just ₹1.5 crore in FY25, with founders Vivek Raghavan and Pratyush Kumar owning about 52% of the company.
HCLTech CEO C Vijayakumar revealed the strategic rationale behind the Sarvam AI investment during a recent interaction, stating that the platform's quality was 'extremely good' and the team's capabilities gave him confidence in their potential to become 'a truly influential company out of India in AI for India, and potentially for the world'. According to The Economic Times, Vijayakumar described the investment as 'a strategic partnership that we have built, and the investment is really to put some true skin in the game and really make this a very important relationship for us'. The CEO explained that HCLTech saw the opportunity to 'play a meaningful role' given its global presence, AI ambitions, and deep engineering heritage, along with its 'lot of software products that can help build a full stack'. Vijayakumar outlined five new growth vectors to scale up advanced AI revenue, including AI factories, physical AI, inferencing chips for design validation, and building differentiated IP to help scale AI. Sovereign AI represents a 'completely new growth vector' with four key themes: India-specific sectors like banking, insurance, government technology, and large commercial firms where Sarvam fits extremely well; government services for reimagining citizen services; global enterprise use cases requiring small language models and domain-specific models; and large countries wanting to build sovereign models where Sarvam's multilingual capability and Indian experience will be relevant for many countries. Vijayakumar noted that the investment aligns with Indian businesses focused on balancing price and performance, accessing multilingual models, protecting data privacy, and retaining full ownership of their systems. Such opportunities exist in foreign markets as well, with good traction expected in Africa, Latin America, some parts of Europe, and the Middle East.
HCLTech stated that the investment will support Sarvam AI's research and development efforts, including the training of next-generation AI models for agentic AI, coding and cybersecurity applications. According to The Hindu BusinessLine, the investment will fund Sarvam's ongoing research and development for training its models for agentic AI, coding, and cybersecurity use cases. The investment gives HCLTech a 10.46% stake in Sarvam AI and anchors the first close of the startup's Series B funding round. As reported by NDTV Profit, Managing Director and CEO C Vijayakumar said the partnership was driven by strategic relevance and future growth opportunities, noting that the deal would have only a limited impact on HCLTech's revenue in FY27. However, Vijayakumar said HCLTech sees substantial growth potential in the sovereign AI market and expects the partnership to support a 30% sales growth opportunity in the segment over time. Nomura Research believes HCLTech's enterprise transformation expertise and global client relationships will aid Sarvam in building a powerful, end-to-end sovereign AI ecosystem for India and beyond. With the 10.46% stake, HCLTech will have a board seat and actively contribute to strategy as part of board membership, while leveraging its deep engineering capabilities and software IPs including data products, metadata management, active data intelligence platform, and Vector AI DB. For now, the company is planning on cross-selling its solutions, with Vijayakumar noting that software products like Unica for marketing automation, which caters to large-scale customers like State Bank of India, will complement Sarvam's capabilities. Speaking to ET Now, Vijayakumar emphasized that the partnership will focus on creating new enterprise use cases and accelerating AI deployment across industries, with the company planning to combine its deep enterprise expertise with Sarvam's AI models and multilingual capabilities to create industry-specific solutions.
HCLTech reported strong financial results for Q4 FY26, with consolidated profit increasing 4.20% year-on-year to ₹4,488 crore compared to ₹4,307 crore in the same quarter of the previous financial year. Sequentially, the IT company's profit rose by 10.11% from ₹4,076 crore reported in Q3 FY26. The consolidated revenue from operations in Q4 FY26 was ₹33,981 crore, marking an 12.35% YoY growth from ₹30,246 crore in Q4 FY25. In constant currency terms, the company's revenue surged by 2.4% YoY but declined 3.3% on quarter-on-quarter basis. In dollar terms, revenue increased 5.3% YoY but slipped 2.9% QoQ to $3,682 million in Q4 FY26. EBIT stood at ₹5,620 crore versus ₹5,442 crore in Q4 FY25 and ₹6,285 crore in Q3 FY26, representing a decline of 10.6% QoQ and growth of 3.3% YoY. EBIT margin, excluding restructuring, was at 17.7% in the reporting quarter. For FY27, the company expects revenue to grow by 1.0% to 4.0% YoY while the Services revenue growth is expected to be between 1.5% and 4.5% YoY in constant currency terms. HCLTech grew the fastest among India's top five IT services firms in FY26, ending the year with $14.66 billion in revenue, up 6% from the previous year.
HCLTech has guided for its revenue growth in financial year 2027 to be between 1% to 4% compared to financial year 2026. As reported by CNBC TV18, the guidance assumes a 50 basis points impact due to client specific issues, and 2% to 3% impact due to AI deflation. After the fourth quarter of 2025-26, some brokerages had downgraded the stock as revenues came at the lower end of the guidance due to cuts in telecom discretionary spend, and SAP program cancellations. Of the analysts tracking the stock, about 68% have a 'Hold' or 'Sell' rating on the stock. Despite the weak Q4FY26 and guidance, the stock trades at a premium to TCS and Infosys on FY27 earnings estimates. The investment marks one of the largest strategic bets by an Indian IT services company on a domestic AI startup and underscores the growing importance of sovereign AI as governments and enterprises seek greater control over AI models, data and infrastructure. This development comes against the backdrop of an AI-led assault on IT shares, with shares of TCS, Infosys, HCLTech, Wipro, and Tech Mahindra falling 32%, 29.7%, 30%, 31%, and 10.1% respectively since the start of the year. Vijayakumar believes emerging AI opportunities will more than compensate for industry deflation pressures, noting that 'Sovereign AI adds another big growth vector for us to chase' and that 'all of this will more than offset and continue to create a good net growth for us'.
