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View Promises →HCL Technologies Ltd — Q1 FY26
HCLTech reported Q1 FY26 revenue growth of 3.7% YoY in constant currency, slightly above expectations, but EBIT margin fell to 16.3% due to utilization issues, a client bankruptcy, and accelerated AI investments.
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HCLTech reported Q1 FY26 revenue growth of 3.7% YoY in constant currency, slightly above expectations, but EBIT margin fell to 16.3% due to utilization issues, a client bankruptcy, and accelerated AI investments. The company revised FY26 revenue guidance upward to 3%-5% (from earlier 2%-4%) but lowered EBIT margin guidance to 17%-18% (from 18%-19%). Growth was driven by technology (+13.7% YoY) and financial services (+6.8% YoY), while manufacturing and retail remained weak. Net new bookings were $1.8 billion, with two large deals slipping to Q2. Management highlighted strong AI momentum, including an OpenAI partnership and 35 AI Force deployments. Risks include margin pressure from restructuring costs and potential demand softness in auto and life sciences.
HCLTech ने पहली तिमाही में कमाई में 3.7% की बढ़ोतरी दर्ज की, जो उम्मीद से थोड़ी बेहतर रही। लेकिन मुनाफा घटकर 16.3% रह गया, क्योंकि कर्मचारियों के इस्तेमाल में कमी, एक ग्राहक के दिवालिया होने और AI में ज्यादा निवेश के कारण लागत बढ़ी। कंपनी ने इस साल की कमाई वृद्धि का अनुमान 3%-5% कर दिया है, जो पहले 2%-4% था। लेकिन मुनाफे का अनुमान घटाकर 17%-18% कर दिया है। तकनीकी और वित्तीय सेवाओं में अच्छी बढ़त रही, जबकि विनिर्माण और खुदरा कमजोर रहे। नए ऑर्डर 1.8 अरब डॉलर के आए, लेकिन दो बड़े सौदे अगली तिमाही में टल गए। AI में तेजी है, OpenAI से साझेदारी और 35 AI प्रोजेक्ट चल रहे हैं। जोखिमों में मुनाफे पर दबाव और ऑटो व दवा क्षेत्रों में कमजोर मांग शामिल है।
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Margin pressure from restructuring and utilization
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Read Transcript →Quarter Snapshot
Net New Bookings (TCV)
$1.8B
Flat QoQ
Bookings were decent; two large deals slipped to Q2. A large FS consolidation win not included in TCV.
Services Revenue Growth (YoY CC)
4.5%
+4.5pp YoY
IT & Business Services grew 3%, ER&D grew 11.8% YoY. Software declined 3%.
Attrition (LTM IT Services)
12.8%
-0.5pp QoQ
Voluntary attrition decreased sequentially, indicating improved retention.
AI Force Deployments
35 clients
+5 QoQ
AI Force platform now deployed across 35 clients with 70+ deployments, driving new wins.
What Changed vs Last Quarter
NEW
Restructuring program in FY26
One-time restructuring costs (people and non-people) of 30-40 bps impact in subsequent quarters to improve structural agility.
NEW
AI investments to normalize by FY27
Management expects SG&A percentage to normalize in FY27 as growth catches up with AI investments.
UPDATED
FY26 revenue guidance raised to 3%-5% CC
Revenue growth guidance improved from 2%-4% to 3%-5% in constant currency, based on better Q1 performance and outlook.
UPDATED
FY26 EBIT margin guidance lowered to 17%-18%
EBIT margin guidance reduced from 18%-19% to 17%-18%, factoring in Q1 headwinds, restructuring costs, and AI investments.
DROPPED
Q1 Seasonality Expected to Be Normal
Q1 FY26 will have typical seasonal weakness but better than Q1 FY25, with ramp-up of mega deal starting in a few weeks.
DROPPED
Inorganic Contribution ~1% in FY26
The CTG acquisition (closed Dec 2024) will contribute approximately 1% to FY26 revenue growth.
NEW RISK
Margin pressure from restructuring and utilization
Restructuring costs and lower utilization from skill mismatches could persist into Q2, weighing on margins.
NEW RISK
Demand weakness in manufacturing and auto
Automotive and manufacturing verticals continue to see ramp-downs, with no quick recovery expected.
NEW RISK
AI-driven revenue deflation may outpace wallet share gains
Productivity benefits from GenAI could reduce revenue from existing contracts, though management claims wallet share gains offset this.
NEW RISK
Deal slippages could impact revenue ramp
Two large deals slipped from Q1 to Q2, and ramp-up of a large contact center deal is slower than expected.
RISK GONE
Tariff-Driven Recession Impact
Management flagged that tariffs and deglobalization could lead to budget cuts, contract renegotiations, and delays, especially in retail and manufacturing verticals.
RISK GONE
Deal Deferral Due to Macro Uncertainty
One large deal was deferred in Q4 due to broader environment, not directly tariff-related, indicating potential pipeline softness.
RISK GONE
Discretionary Spending Subdued
Management expects discretionary spending to remain weak, with new projects requiring strong ROI justification amid macro challenges.
RISK GONE
GCC Insourcing Risk
Analyst raised concern that GCC setups may eventually insource work, reducing annuity revenue visibility; management downplayed but did not fully address.
🤫 Topics management stopped discussing
Mentioned in Q1 FY25, Q2 FY25, Q3 FY25, Q4 FY25
Full-year constant currency revenue growth guidance for the company, with lower end assuming macro deterioration and upper end assuming stable environment and large deal closures.
Mentioned in Q1 FY25, Q3 FY25
Management indicated that the automotive segment remains challenged, with declines expected for another couple of quarters before recovery.
Mentioned in Q1 FY25, Q4 FY25
Management expects discretionary spending to remain weak, with new projects requiring strong ROI justification amid macro challenges.
Mentioned in Q1 FY25, Q3 FY25
Implies a sequential decline or modest growth due to large project completion and planned mega deal rundown.
Fast read
Guidance and risk preview
Revenue growth guidance improved from 2%-4% to 3%-5% in constant currency, based on better Q1 performance and outlook.
Restructuring costs and lower utilization from skill mismatches could persist into Q2, weighing on margins.
View Risks →