Limited upside in HCLTech

HCLTech reported a strong performance across its services and software businesses for the January-March quarter of the financial year 2024-25 (Q4FY25) despite global uncertainty and reduced discretionary spending.

- DEVANGSHU DATTA

In constant currency, services grew by 0.7 per cent quarter-on-quarter (Q-o-Q), while the software business grew by 4.9 per cent year-on-year (Y-o-Y) in Q4.

HCLTech is guiding for revenue growth in the range of 2-5 per cent for FY26, on consolidated basis and also its services. The management expects 1 per cent contribution to revenue from the Hewlett Packard Enterprise (HPE) acquisition, implying organic revenue growth of 1-4 per cent. For FY26, the earnings before interest and tax (EBIT) margin guidance is 18-19 per cent.

AI and Gen AI are now integral to most of these deals and the firm saw strong deal bookings in Q4FY25. The net-new total contract value (TCV) is $2.9 billion, an increase of 30 per cent Y-o-Y.

The constant currency growth guidance of 2-5 per cent seems optimistic due to poor macro. But the deals give some visibility. The management indicated that the upper-end of 5 per cent of guidance assumes status quo on demand. In effect, this growth would be achieved only if the deal pipeline continues to deliver and there is fast ramp up on new deals.