HCLTech on Monday reported sequential growth in its revenue, net profit, and Ebitda for the December quarter, though the results fell short of Bloomberg’s estimates across key metrics. Revenue grew 3.6% quarter-on-quarter to Rs 29,890 crore, while net profit rose 8.4% sequentially to Rs 4,591 crore.
However, both figures missed analysts’ expectations of Rs 30,036 crore for revenue and Rs 4,614 crore for net profit. Despite these misses, the company raised the lower end of its FY25 revenue growth guidance to 4.5%-5.0% in constant currency terms, narrowing it from the earlier 3.5%-5% range, signaling confidence in its outlook.
“We do see an improvement in the demand environment, with discretionary spending witnessing some uptick. Clients are investing in initiatives to drive innovation and efficiency, and generative AI (genAI) and data are central to these efforts. With this, our updated guidance for FY25 is revenue growth of 4.5%-5%, including contributions from the acquisition of HPE CTG assets, which closed at the beginning of December,” said C Vijayakumar, CEO and managing director of HCLTech.
The December quarter, traditionally a seasonally weaker period for IT services companies, saw HCLTech’s operating margin rise 93 basis points quarter-on-quarter to 19.5%. This improvement was driven by growth in the services business and favourable currency movements during the quarter. The company maintained its operating margin guidance for FY25 at 18%-19%, reflecting operational stability despite ongoing global economic uncertainties.
“We gained 100 basis points through project ascent productivity improvements, which were partially offset by a 40 bps impact from wage hikes and another 40 bps from furloughs, while favourable forex movements contributed an 18 bps benefit,” explained CFO Shiv Walia.
The quarter saw a slight dip in deal activity, with total contract value (TCV) declining to $2.1 billion from $2.2 billion in the preceding quarter. HCLTech signed 12 deals during the period, comprising seven in its services business and five from HCLSoftware. The management highlighted a noticeable reduction in the average tenure of signed deals, which impacted TCV figures. “The shift toward shorter-tenure deals naturally moderates TCV. This trend reflects evolving client priorities and market dynamics,” Vijayakumar noted.
Performance across business verticals was mixed. Financial services, HCLTech’s largest revenue contributor, experienced a 20 bps sequential decline in revenue on a constant currency basis, although demand showed signs of recovery. Manufacturing and life sciences/healthcare revenues fell by 40 bps and 50 bps, respectively. In contrast, technology/services and telecommunications/media saw marginal growth of 20 bps each.
Geographically, the Americas – HCLTech’s largest market – contributed to growth, with revenue rising 40 bps quarter-on-quarter. However, this was partially offset by declines of 20 bps in Europe and 20 bps in the rest of the world. The company said that while regional performance remained uneven, it continued to see robust traction in strategic areas such as generative AI and digital transformation.
Generative AI remained a key growth driver for HCLTech during the quarter, with several large deals influenced by AI-led transformations. “The cost of using large language models (LLMs) and conversational AI has dropped by over 85% since early 2023, making many more use cases viable,” Vijayakumar said. “Some of the largest deals we signed this quarter were driven by AI-enabled solutions, showcasing its transformative potential,” he added.
Looking ahead, the management expressed optimism about the improving demand environment, citing rising investments in innovation and efficiency by its clients.