Hexaware Tech Stock Plummets 20% Post-Earnings as Margins Squeeze

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AuthorKavya Nair|Published at:
Hexaware Tech Stock Plummets 20% Post-Earnings as Margins Squeeze
Overview

Hexaware Technologies faced a sharp sell-off, with shares plummeting nearly 20% from their IPO price and hitting a low of ₹572.50 on February 6, 2026. The decline followed weak Q4 2025 results, where revenue met expectations but operating margins contracted by 60 basis points, missing forecasts. This performance triggered downgrades from major institutions like JPMorgan and HSBC, citing growth concerns amid a challenging macro environment. Despite management's projection of improved revenue growth and stable EBIT margins for 2026, the market reacted negatively to the immediate profitability squeeze.

### Margin Pressure Fuels Sharp Sell-Off

Hexaware Technologies' stock experienced a significant downturn on February 6, 2026, falling another 8% to extend Thursday's 9% slide. At its intraday low of ₹572.50, the stock was down a concerning 20% from its initial public offering price of ₹708. The primary catalyst for this market reprisal was the company's fourth-quarter fiscal year 2025 earnings report. While revenue in constant currency terms declined by 1.4%, aligning with analyst expectations, a 60-basis point contraction in operating margins fell short of forecasts. This margin compression, a key indicator of profitability, overshadowed the revenue performance and triggered immediate reactions from the financial community.

### Brokerages Slash Targets Amid Growth Concerns

Prominent financial institutions swiftly revised their stance on Hexaware Technologies following the disappointing results. JPMorgan downgraded the stock from 'overweight' to 'neutral', slashing its price target to ₹640 from ₹780. HSBC followed suit, moving from a 'buy' rating to 'hold' and reducing its target price from ₹970 to ₹735. These recalibrations reflect investor apprehension regarding the company's ability to maintain profitability amidst broader industry headwinds. Jefferies had previously downgraded the stock to 'hold' on January 5, 2026, citing growth challenges and projecting 8-9% year-over-year constant currency revenue growth for 2026-2027, a rate considered among the lowest in its mid-cap IT coverage. The current market valuation, with a P/E ratio around 30x, appears high relative to peers like TCS and Infosys trading at P/E ratios of approximately 22-23x, suggesting that the premium valuation is now being scrutinized more intensely.

### Navigating Sector Headwinds and Future Outlook

The IT services sector is currently navigating a complex global environment. While overall IT spending is projected to grow by 10.2% in 2026, reaching $6.07 trillion, with IT services expected to rise 9.6%, a concurrent global tech sell-off is underway. This downturn is fueled by concerns over AI growth sustainability, intense competition, and the impact of high valuations across the sector. The Nifty IT index itself recently experienced a sharp decline of nearly 6%. In this context, Hexaware's margin miss becomes particularly significant. Despite these near-term pressures, Hexaware's management anticipates improved revenue growth in 2026 compared to 2025's 7.6% and projects EBIT margins to stabilize between 13% and 14%. CEO Srikrishna noted accelerated deal wins at the end of the year, positioning the company for a stronger 2026, leveraging AI capabilities to launch new services monthly. However, the immediate market response indicates that investors are focused on the current operational performance and profitability challenges rather than the forward-looking projections, especially given the stock's recent technical deterioration and downgrade in analyst ratings.

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