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View Promises →HCL Technologies Ltd — Q2 FY24
HCLTech delivered a strong Q2 FY24 with services revenue growing 1.6% QoQ in constant currency and EBIT margins improving 154 bps QoQ to 18.5%.
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HCLTech delivered a strong Q2 FY24 with services revenue growing 1.6% QoQ in constant currency and EBIT margins improving 154 bps QoQ to 18.5%. Record bookings of $3.96 billion were driven by a mega deal with Verizon Business, signaling robust demand for cost optimization and strategic partnerships. However, discretionary spending remains weak, leading to a revised FY24 revenue guidance of 5%-6% (from 6%-7%) and services organic growth of 4.5%-5.5%. Management expects strong H2 growth from the Verizon ramp, software seasonality, and steady-state conversions. Margin guidance of 18%-19% is reaffirmed, supported by productivity gains and cost controls. Key risk: sustained weakness in discretionary spend could pressure organic growth and delay recovery.
HCLTech ने दूसरी तिमाही में अच्छा प्रदर्शन किया। सेवाओं से होने वाली कमाई पिछली तिमाही के मुकाबले 1.6% बढ़ी। कंपनी का मुनाफा (EBIT) 18.5% हो गया, जो पहले से 1.54% ज्यादा है। कंपनी को रिकॉर्ड 3.96 अरब डॉलर के नए ऑर्डर मिले, जिसमें Verizon Business के साथ बड़ा सौदा शामिल है। इससे पता चलता है कि कंपनियां लागत बचाने और साझेदारी पर ध्यान दे रही हैं। हालांकि, ग्राहकों का खर्च कमजोर है, इसलिए कंपनी ने इस साल की कमाई वृद्धि का अनुमान 5%-6% कर दिया है (पहले 6%-7% था)। प्रबंधन को उम्मीद है कि साल की दूसरी छमाही में Verizon के सौदे और सॉफ्टवेयर की मांग से वृद्धि होगी। मुनाफा 18%-19% रहने का अनुमान है। मुख्य जोखिम: अगर खर्च कमजोर रहा, तो वृद्धि धीमी हो सकती है।
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Sustained weakness in discretionary spending
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Read Transcript →Quarter Snapshot
Total Bookings
$3.96B
+98% QoQ
Record quarterly bookings, nearly doubling from ~$2B in prior quarters, driven by the Verizon mega deal.
Attrition (LTM)
14.2%
-10pp YoY
Attrition declined significantly from ~24% a year ago, reflecting improved employee retention.
Services EBIT Margin
18.5%
+212 bps QoQ
Services margin expanded sharply due to productivity gains, lower subcontractor costs, and fresher deployment.
DSO (including unbilled)
83 days
-5 days QoQ
Improved cash conversion with DSO reducing by 5 days sequentially, reflecting better collections.
What Changed vs Last Quarter
NEW
Services organic growth guidance of 4.5%-5.5%
Organic services revenue growth for FY24 is guided at 4.5%-5.5% in constant currency, implying strong H2 CQGR of 2.6%-3.8%.
NEW
Wage hike impact of 60-65 bps in Q3
Annual wage hikes deferred to October will impact Q3 margins by ~60-65 bps, with an additional 25-30 bps in Q4.
UPDATED
FY24 revenue growth guidance revised to 5%-6%
Company-level constant currency revenue growth for FY24 is now expected at 5%-6%, down from the earlier 6%-7% range, due to weak H1 discretionary spend.
UPDATED
EBIT margin guidance maintained at 18%-19%
Full-year EBIT margin guidance remains unchanged at 18%-19%, supported by operational efficiencies and cost optimization.
DROPPED
Strong booking expected in Q2 FY24
Management expects a significant spike in bookings in Q2, driven by advanced-stage large deals in the pipeline.
NEW RISK
Sustained weakness in discretionary spending
Management noted discretionary spend has not recovered as expected, and the macro environment remains uncertain, which could pressure organic growth.
NEW RISK
Guidance cut raises execution questions
Analysts questioned the sharp 300 bps cut in the upper end of revenue guidance despite strong bookings, suggesting potential over-optimism earlier.
NEW RISK
Verizon deal ramp-up risks
The mega deal with Verizon is critical for H2 growth; any delays in transition or execution could impact revenue targets.
NEW RISK
Margin sustainability after wage hikes
Q3 margins face headwinds from wage hikes (60-65 bps) and potential reversal of one-off cost savings, which may pressure the 18%-19% guidance.
RISK GONE
Persistent discretionary spend weakness
Tech and telecom verticals saw deeper-than-expected cuts in discretionary spending, which may continue to pressure revenue.
RISK GONE
High ask rate for FY24 guidance
Analysts questioned the feasibility of achieving guidance given the soft Q1 and the need for a sharp acceleration in subsequent quarters.
RISK GONE
Revenue forecasting inaccuracies
Management acknowledged that forecasting discretionary spend has been challenging, leading to repeated misses in recent quarters.
Fast read
Guidance and risk preview
Company-level constant currency revenue growth for FY24 is now expected at 5%-6%, down from the earlier 6%-7% range, due to weak H1 discretionary s...
Management noted discretionary spend has not recovered as expected, and the macro environment remains uncertain, which could pressure organic growth.
View Risks →