IT major HCLTech reported a downturn in revenue from its European operations in the quarter ended June, largely due to the underperformance of its recent acquisition, ASAP Group, according to C Vijayakumar, chief executive officer of the company.
“The acquired company, ASAP, particularly in the automotive sector, performed below our expectations. There’s noticeable softness in the automotive segment, especially in Germany, which is exerting pressure,” Vijayakumar told FE.
The company’s revenue contribution from Europe fell 100 bps in the June quarter, whereas sales rose 80 bps from the Americas region sequentially and 20 bps from the rest of the world. HCLTech completed the acquisition of ASAP Group, a German automotive engineering services provider, in August 2023.
HCLTech also saw volatility in its engineering and R&D (ER&D) services. “Our ER&D services saw a slight decline sequentially due to ramp downs in manufacturing and mid-tech verticals,” Vijayakumar said. “However, with the pipeline we have and some recent wins, we believe it will pick up.”
Despite these setbacks, HCLTech has been making strides in the realm of generative AI (GenAI), signing several small unit deals amounting to millions of dollars, he said. The demand for GenAI is growing, as evidenced by over 200 proofs of concept, leading to broader adoption among clients. “Most of these initiatives involve small projects at the moment, but a couple of them are substantial, double-digit million-dollar deals,” Vijayakumar said.
Among these, transformation deals continue to deliver substantial value, seamlessly integrating GenAI technologies. “In some instances, GenAI is part of larger transformational deals, while in others, it stands alone as small projects,” Vijayakumar said.
Besides these, HCLTech is leveraging GenAI internally to enhance efficiency. “Our own marketing function, along with other departments, is extensively using GenAI tools, which are proving to be quite effective,” he said.
HCLTech has also launched two significant platforms in recent months: HCLTech AI Force and HCLTech Enterprise AI Foundry. These initiatives are designed to simplify and scale enterprise AI journeys, embedding GenAI into the lifecycle management solutions provided to clients.
The company maintained its FY25 revenue guidance at 3-5% in constant currency terms and an operating margin between 18-19%. “Looking ahead, while we anticipate some pressure in the industrial segment in Europe, we are cautiously optimistic about the recovery. Our broad-based interest in AI adoption across the globe gives us a resilient outlook,” Vijayakumar said.
The Noida-headquartered company’s consolidated revenue fell nearly 2% sequentially to Rs 28,057 crore in the April-June quarter. Net profit rose 7% to Rs 4,257 crore on the back of a one-time gain.
