HCLTech vs Sonata Software Q4 FY26

HC

HCLTech

Q4 FY26 · Information Technology

HCL Tech reported Q4 FY26 revenue of $3.68B, up 2.4% YoY but down 3.3% QoQ, missing expectations due to delayed procurement decisions and discretionary spending cuts by two large US telecom clients. Services revenue grew 4.2% YoY while software declined 14% YoY. Full-year revenue grew 3.9% in constant currency, with services up 4.8%. EBITDA margin (ex-restructuring) was 17.7%, down 20bps YoY. Management guided FY27 revenue growth of 1-4% (services 1.5-4.5%) and EBIT margin of 17.5-18.5%, reflecting headwinds from two client-specific reductions (~50bps) and continued soft discretionary spend. AI momentum remains strong with $155M quarterly advanced AI revenue (+6.1% QoQ) and a $100M+ AI factory deal. Key risk: further escalation of tariff volatility or client-specific issues could pressure growth.

Guidance read

FY27 revenue growth 1-4% CC: Consolidated revenue growth guidance for FY27 in constant currency; services growth 1.5-4.5%. FY27 EBIT margin 17.5-18.5%: Operating margin guidance for FY27, excluding impact of acquisitions. Two clients to cause ~50bps growth headwind in FY27: Specific client reductions in manufacturing and retail will impact growth by about 50 basis points. AI native services to grow 25-30%: Management expects advanced AI services (AI factory, custom silicon) to grow at 25-30% annually.

Risk read

Key risks include Telecom discretionary spending cuts may persist — Two large US telecom clients cut discretionary spend in Q4; impact expected to continue through calendar 2026.; AI deflation could accelerate beyond 2-3% — Analyst questioned if deflation from AI could expand; management acknowledged risk but maintained 2-3% estimate for HCL.; Software revenue volatility from government deals — Q4 software revenue missed due to delayed US government decisions; timing of closures unpredictable.; Geopolitical uncertainty in Europe — Management noted softness in Europe due to geopolitical escalations, which could worsen..

Promise ledger

Scorecard data is being built as historical quarters are processed.

SO

Sonata Software

Q4 FY26 · Information Technology

Sonata Software reported Q4 FY26 consolidated revenue of ₹2,536.2 crore, down 3.1% YoY, impacted by domestic headwinds from a large client moving to direct billing. International services revenue grew 6% QoQ in constant currency to $82.4 million, with EBITDA margin expanding 70 bps QoQ to 20.2% driven by AI-led productivity gains and utilization of 91.8%. PAT for international services grew 40.6% QoQ to ₹84.2 crore. The company won two large deals in Q4, including a core banking modernization with a global fintech. AI pipeline reached $280 million, contributing 18% of total order book. Management remains cautiously optimistic on gradual growth improvement, but macro uncertainty and elongated client decision cycles persist. Key risk: sustainability of TMT vertical upturn and potential further contraction in BFSI clients.

Guidance read

International services EBITDA margin to remain at similar levels: Management expects to maintain current EBITDA margin (~20.2%) in the near term, with potential investments for growth. Domestic business to return to growth trajectory in FY27: After covering the loss from a large client moving to direct billing, domestic business is expected to resume historical growth rates within one to two quarters. AI pipeline to drive gradual improvement in growth over medium term: Management remains cautiously optimistic on growth, expecting gradual improvement driven by AI and digital transformation initiatives.

Risk read

Key risks include Sustained macro uncertainty and elongated client decision cycles — Management noted that client decision cycles remain elongated due to macroeconomic challenges, which could delay deal closures and revenue conversion.; Potential further contraction in BFSI vertical — Despite a large deal win, management acknowledged that some large BFSI clients may continue to contract spending, impacting growth.; Sustainability of TMT vertical upturn — Management expressed caution on the recent upturn in the TMT vertical, noting that it may not be sustainable and needs to be monitored.; Domestic business margin pressure from new customer acquisitions — New customer wins in domestic business may initially come at low or zero margins, though management believes this is manageable through mix and upselling..

Promise ledger

Scorecard data is being built as historical quarters are processed.