HCLTech on Friday posted a near 2% sequential decline in its topline at Rs 28,057 crore in the April-June quarter on the back of weakness in the IT services & engineering and R&D services segments. However, the company’s consolidated net profit rose 7% quarter-on-quarter to Rs 4,257 crore, aided by an increase in other income and a small decline in expenditure.

The topline as well as the bottomline came in above Bloomberg consensus estimates.

The company also retained its year-on-year revenue guidance for FY25 at 3-5% in constant currency terms and its operating margin around 18-19%.

“At this point, we have not factored in any significant pickup in the discretionary spend. Our assumption has been that discretionary spend this year will be the same as last year. And we continue to maintain that as we see some actions which show that things could have bottomed out,” said C Vijayakumar, CEO and managing director of HCLTech.

“As we’ve stated in the past, seasonally Q1 is a soft quarter for HCL Tech…So, sequentially our revenue declined 1.6% in constant currency and this is better than what we had expected in the beginning of the quarter,” Vijayakumar said.

The operating margin fell 50 basis points q-o-q to 17.1%.

On the deal front, HCLTech saw a sequential decline in deal wins, taking the total contract value (TCV) to $1.96 billion against $2.29 billion TCVs reported in the March quarter.

“The deal wins of $2 billion roughly is our run rate. And we want to highlight that this $2 billion is net new wins. This is new wins from existing customers and new customers. So, this is really a zero renewal or rate card in this,” Vijaykumar said.

Vertical & geographical play

HCLTech’s revenue from its largest vertical, the financial services, fell by 60 basis points q-o-q in April-June on a constant currency basis. Additionally, the company expects to see weakness in the vertical even in the next quarter.

“Some of these (the past large deals in financial services) have transitioned from an onshore model to a global delivery model, which means the revenue would come down. And that’s what you’re seeing in this quarter. And moving forward, we continue to see a lot of cost optimisation deals. And we continue to see modernisation and technology transformation kind of opportunities which will result in significant efficiencies for our customers,” Vijaykumar said.

“Q2 will be a declining quarter for financial services because of the divestment of the firm, State Street divestiture, which will see its revenue going out. But after that, we would expect to see growth in this vertical,” he added.

Further, the revenue from the second and the third-largest contributor, manufacturing and life sciences and healthcare too fell 100 bps and 40 bps, respectively.

“Manufacturing and life sciences and healthcare declined primarily because of seasonality and completion of projects that happened last year and also some softness that we saw in the MedTech industry segment,” he added.

Meanwhile, sales from technology and services, telecommunications, media, publishing and entertainment, and retail rose 30-70 bps. The company also said it is seeing strong traction in the GenAI space, but refrained from commenting on its deal pipeline.

After launching HCLTech AI Force, a GenAI and automation platform a couple of months ago, the company had launched another offering called HCLTech Enterprise AI Foundry to simplify and scale enterprise AI journeys.

“We have multiple ongoing engagements where we are working with clients to deliver real value for a global technology major who selected us to implement a GenAI-based solution for gaming review analysis, including the automation of data collection, sentiment analysis and the operational automation, resulting in significant workload reduction. They also selected us to deploy GenAI to transform their content lifecycle management and the processes,” the MD & CEO said.

Further, the company’s revenue contribution from Americas region rose 80 bps sequentially in the June quarter, whereas those from Europe fell 100 bps. Sales from rest of the world rose 20 bps.

“I think we are continuing to see pressure in the industrial segment in the Europe market. And we have a significant presence in that segment. So I would wait for some time before calling out that Europe is going to pick up,” he added.

HCLTech also declared a dividend of Rs 12 per equity share.