IT firm HCLTech on Tuesday posted modest revenue growth and a sequential decline in profitability for the fourth quarter ended March, as weaker discretionary spending and delayed client decision-making offset traction in artificial intelligence-led services.
The company reported a 4.2 per cent increase in consolidated net profit to Rs 4,488 crore for Q4 FY26, compared with Rs 4,307 crore a year earlier. Net profit declined 6.4 per cent quarter-on-quarter (QoQ).
Quarterly revenue rose 0.3 per cent sequentially and 12.3 per cent year-on-year (YoY) to Rs 33,981 crore. In constant currency (CC) terms, revenue fell 3.3 per cent QoQ but increased 2.4 per cent from a year earlier.
Services revenue in CC terms declined 0.1 per cent sequentially but grew 4.2 per cent YoY, while HCLSoftware CC revenue fell 14.1 per cent YoY. The company’s software annual recurring revenue (ARR) stood at USD 1.05 billion, down 0.5 per cent YoY in CC terms.
“During the quarter, our performance came below our expectations due to softness in certain parts of our business due to lower discretionary spend and delayed decision making,” said C Vijayakumar, CEO and MD, HCLTech, adding that the company’s priority in FY27 would be positioning itself to capitalise on AI-led opportunities for long-term value creation
HCLTech said its advanced AI business generated USD 155 million in revenue during the quarter, up 6.1 per cent QoQ n constant currency, taking annualised advanced AI revenues to over USD 620 million in Q4.
Total contract value (TCV) of new deal wins during the quarter came in at USD 1.94 billion, pointing to steady deal momentum despite a challenging demand environment.
Operating performance weakened sequentially, with earnings before interest and taxes (EBIT) falling 10.6 per cent QoQ to Rs 5,620 crore, though it rose 3.3 per cent YoY. EBIT margin stood at 16.5 per cent, or 17.7 per cent excluding restructuring costs.
Net income margin was 13.2 per cent, or 14.2 per cent excluding restructuring, the company said.
HCLTech’s return on invested capital (ROIC) for the company improved to 40.3 per cent, up 235 basis points YoY, while services ROIC rose to 47.0 per cent, up 155 basis points. Free cash flow to net income stood at 107 per cent on a last-twelve-month basis.
The company’s total employee count stood at 2,27,181, with a net addition of 802 employees during the quarter, including 1,712 freshers. Trailing twelve-month attrition declined to 12.5 per cent, compared with 13.0 per cent in the same quarter last year.
HCLTech declared a dividend of Rs 24 per share, its 93rd consecutive quarterly dividend payout.
On FY27 Outlook
For FY27, the company forecast revenue growth of 1 per cent to 4 per cent YoY in constant currency, with services revenue growth of 1.5 per cent to 4.5 per cent, and guided for an EBIT margin of 17.5 per cent to 18.5 per cent.
HCLTech said it expects demand conditions to remain uncertain into FY27, with some pressures from the Q4 likely to spill over into the early part of the new fiscal year.
“Our ‘services’ performance this quarter came in at the lower end of our expectations,” said CEO C Vijayakumar during post earnings press conference, citing a reduction in discretionary spending in the telecom sector and the discontinuation of two SAP programmes late in the quarter.
While annuity-led telecom programmes remained stable, Vijayakumar said select clients scaled back discretionary investments across digital and engineering services. “Some of this impact is likely to carry into the next quarter, and we have factored that into the guidance we are providing,” he added.
In contrast, North America continues to show relative resilience, with no broad-based macroeconomic challenges at this stage, he said.
However, Vijayakumar flagged two client-specific issues in the Americas that are expected to create a headwind of around 50 basis points to growth in FY27, as those clients navigate business pressures and scale back IT and operational spending.
Vijayakumar said the business environment remains highly fluid, making it difficult to form a definitive view on the next 12 months. He pointed to second-order effects from rising energy prices and supply-chain disruptions, which are weighing on the growth outlook in Europe, with risks of inflation and industrial slowdown becoming more pronounced.
Shares of HCLTech ended Tuesday’s session on the NSE at Rs 1,439, up Rs 10.70, or 0.75 per cent.[color=hsl(0,0%,60%)] |
