HCLTech sees muted FY27 after fastest growth in three years

HCL Technologies Ltd closed the previous financial year (FY26) with the fastest revenue growth in the last three years, but pointed to a slower outlook for the current financial year due to the uncertain demand environment.

The nation’s third-largest information technology (IT) services company posted consolidated revenue growth of 5.95% year-over-year to $14.66 billion. Bloomberg 45 analysts estimate $14.1 billion.

However, net profit fell 4.05% year-on-year to $1.96 billion compared to a 7.6% increase in FY25.

Despite the encouraging revenue performance, the Noida-headquartered company appeared cautious about the current fiscal, forecasting revenue growth of 1-4% in constant currency terms, in line with current constant currency growth of 3.9% overall. A fixed currency does not take into account currency fluctuations.

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At the post-earnings press conference on Tuesday, CEO C. The business environment remains fluid, making it difficult to form a definitive view on how the next 12 months will unfold, Vijayakumar said.

“We are seeing second-order effects emerging, with rising energy prices and supply chain disruptions weighing on the growth outlook in Europe, while risks of inflation and industrial slowdowns also become more pronounced,” said Vijayakumar. “North America continues to demonstrate relative resilience without any broad-based macroeconomic challenges at this stage.”

The company gets just over half of its revenue from U.S.-based customers. About a quarter come from European customers. The majority of overall revenue growth in FY26 was driven by financial institutions, which accounted for just over one-fifth of total revenue.

HCLTech’s performance contrasted with that of two of its five major rivals. Tata Consultancy Services (TCS) and Wipro’s revenues fell 0.54% and 0.32% year-on-year, respectively, to $30.08 billion and $10.48 billion in FY26.

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While Wipro’s management highlighted geopolitical and trade uncertainties, TCS’s management expected long-term agreements and strong customer commitments despite these macroeconomic challenges.

Vijayakumar said HCLTech’s business fundamentals remain strong but the company faces two customer-specific challenges in the Americas, which will create a headwind of around 50 basis points to growth in FY27. One hundred basis points is 1%.

“These customers are coping with their own business pressures in the current macro environment and have reduced their IT and business operations spend,” he added.

External factors such as Conflicts in West Asia and the rise of automation tools may further increase demand for Indian IT outsourcing providers as major global customers prioritize core spending and cut discretionary technology budgets.

The company’s forecast for FY27 is also lower than its initial outlook for FY26. In April last year, it had targeted 2-5% full-year revenue growth in constant currency terms. Management attributed the softer outlook to two customers restricting technology spending and AI-led deflation, which it expects to rise as much as 3% annually.

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Analysts were not impressed, said Sushovon Nayak, chief IT analyst at Anand Rathi Institutional Equities, saying the figures were insufficient.

“Guidance has been cut and some tech customers are cutting spending, which will impact overall growth,” Nayak said. “HCLSoftware also had a negative impact on growth. In our view, the company will now seek further acquisitions.”

It is noteworthy that the revenue from the company’s software products business decreased by 2.8% compared to the previous year, falling to 1.39 billion dollars.

HCLTech, the first IT services company to disclose revenue from AI in October, reported annual advanced AI revenue of $620 million. The company classifies ‘Advanced AI’ as revenue from agency AI, AI factories and physical AI.

Another area of concern was the company’s operating margin of 17.9%, which was 110 basis points lower than in FY25. Much of the decline in profitability was due to the restructuring plan it launched last year.

The company expects lower profitability in the future. Management kept operating margins for the full year between 17.5% and 18.5%, below expectations of 18-19% announced at the beginning of last year.

Shares of HCLTech gained 0.92% on BSE. ₹1,441.55 on Tuesday. The results were announced after Sunday time.

The company increased its number of employees by 3,761 people to 227,181 employees by the end of last year. Like its peers, management refrained from setting hiring targets and insisted on evaluating hires on a quarterly basis.