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Revenue
₹26,296 Cr
verified against source
Revenue YoY
6.3%
reported change
EBITDA
Pending
latest reported figure
Source
screener in
record provenance
Actual signal trajectory
Where this quarter sits.
Quarter read
What the record says.
HCLTech reported a soft Q1 FY24 with constant currency revenue growth of 6.3% YoY but a sequential decline of 1.3%, missing internal expectations. Services revenue fell 1% QoQ, dragged by a 5.2% sequential drop in ER&D, particularly in tech and telecom verticals due to discretionary spend cuts. EBIT margin contracted to 17% from 18.1% QoQ, impacted by lower utilization and one-time costs. Bookings were soft at $1.6 billion, but management highlighted an all-time high pipeline, up 18% QoQ and 26% YoY, with advanced-stage large deals expected to convert quickly. FY24 revenue and margin guidance were maintained, relying on a strong Q2 booking conversion and cost actions including skipping compensation reviews for senior management. Key risks include persistent discretionary spend weakness and the high ask rate for achieving guidance.
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Guidance to track
- Despite Q1 softness, management reaffirms constant currency revenue growth guidance of 6-8% for FY24, relying on strong pipeline conversion.
- Management reaffirms EBIT margin guidance of 18-19% for FY24, supported by cost actions including skipping compensation reviews.
- Management expects a significant spike in bookings in Q2, driven by advanced-stage large deals in the pipeline.
Risks flagged
- Tech and telecom verticals saw deeper-than-expected cuts in discretionary spending, which may continue to pressure revenue.
- Analysts questioned the feasibility of achieving guidance given the soft Q1 and the need for a sharp acceleration in subsequent quarters.
- Management acknowledged that forecasting discretionary spend has been challenging, leading to repeated misses in recent quarters.
Key quotes
- While we expected the quarter to be soft, it came in lower than our own expectations.
- The ask rate has certainly gone up... we have done the math, we have done the numbers... the pipeline is what is giving us that confidence.
- We have made a decision to skip the compensation review, starting with the management layer... and also defer for junior to mid-level people by a quarter.
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