HCLTECH’s growth exceeds TCS, INFY, but tends toward fiscal 26 outlook on macro challenges
HCL Technologies Ltd led the growth of India’s top four software services companies for the second consecutive year, but shows cautious outlook for fiscal year 2026 (FY26), with revenue expected to rise by 2-5% amid macroeconomic challenges.
HCLTECH, India’s third largest information technology services company, reported annual revenues of US$13.84 billion for March, up 4.3% year-on-year. The country’s largest information technology (IT) company and Tata Consultancy Services Ltd (TCS), the second largest in Infosys Ltd, grew annual revenue by 3.78% and 3.85% respectively. By comparison, the fourth largest Vipro, the full-year revenue fell 2.7% year-on-year.
Like peers TC, Infosys and Wipro, Noida-based IT service providers are watching the start of the fiscal year 2 storm, even though it directed 5% growth in a constant currency manner, which did not take into account currency volatility. HCLTECH guided the start of the new Treasury as it outlined revenue growth of 2% to 5%, which is also the slowest projection at the lower end since March 2020.
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“We believe that in this environment, we will continue to succumb to this environment. Geopolitical factors such as tariffs and globalization are expected to affect IT services,” said C. Vijayakumar, CEO of HCLTECH.
“Observing and monitoring the ongoing developments will be an important topic in the coming months,” added Vijayakumar.
Much of this concern stems from the macroeconomic uncertainty inspired by tariff slippers by U.S. President Donald Trump.
In this way, every company in every IT service company in the country guided the start of the 26th fiscal year slowly. The company’s performance and reviews echoed the performance and reviews of three large peers, who said customers slowed down decisions and suspended projects due to the hazy macroeconomic environment.
Although TCS did not provide guidance, Infosys expects revenue growth in FY26 to be 3%, the weakest guidance since April 2009, when it expects revenue declines by 6.7-3.1% in FY10.
Smaller peers Wipro also hope to grow revenue at the slowest rate during the April-June period in FY24. The company has outlined a quarterly decline of 3.5% to 1.5% in terms of constant currencies. Wipro provides guidance for the next quarter, while Infosys provides guidance for the whole year. TCS does not provide quarterly or annual growth guidance.
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Most of HCLTECH’s revenue growth comes from telecommunications companies and media companies, which account for 92% of the company’s incremental revenue. Telecom, media, publishing and entertainment companies together earn 12.6% of the company’s total revenue.
The highlight of its transcript is its net profit. HCLTECH reported full-year net income of US$2.04 billion, an annual increase of 7.65%. This way, the company exceeded analysts’ expectations in terms of revenue and net profit.
In terms of operating margins, the company’s profitability expanded by 10 basis points to 18.3%. This is consistent with Infosys and Wipro, which expand their edges by 40 basis points and 100 basis points respectively.
A basis point is one percent of a percentage point.
The majority of profitability is due to the company’s software products division (the company’s most profitable business division). The profitability of the software business grew by 200 basis points to 26.6% in fiscal 25.
HCLTECH is one of the few large IT outsourcing providers that rely heavily on sales and licensing revenues for software products. The company’s revenue from its software business grew 3.3% to $1.43 billion, but the greater impact of the division is the company’s operating margin.
The company’s revenue in the fourth quarter (January to March 2025) fell 1% to $3.5 billion in succession, while net profit fell 8.8% to $496 million. The decline in revenue was largely due to the lower business of its second-largest customer bucket manufacturer.
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Still, at least one analyst said that was consistent with expectations.
“HCLT’s Q4FY25 results are roughly consistent with the street expectations, with QOQ CC revenue down 0.8%, which also supports a 18% margin for Inline EBIT (earnings and taxes before interest and taxes),” said Manik Taneja, executive director of Axis Capital.
The company’s employees fell by 4,061 to 223,420, making HCLTECH the only company to reduce its number of employees. Peers TC, Infosys and Wipro have added employees in FY25.
HCLTECH’s narrowing of staff, coupled with uncertain demand, demonstrates a cautious hiring prospect, while accelerated adoption of generative AI raises fundamental questions about the general future of IT workforce.
Currently, management avoids soliciting recruitment targets and points out that more recruitment will be available in FY26 than in FY25 and will also be conducted quarterly.
