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View Promises →HCL Technologies Ltd — Q2 FY25
HCLTech delivered a strong Q2 FY25 with constant currency revenue growth of 6.2% YoY and 1.6% QoQ, driven by broad-based demand across verticals and geographies.
bullish
high
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HCLTech delivered a strong Q2 FY25 with constant currency revenue growth of 6.2% YoY and 1.6% QoQ, driven by broad-based demand across verticals and geographies. Operating margin expanded 149 bps QoQ to 18.6%, aided by operating leverage and seasonally lower marketing spend. Services revenue grew 5.9% YoY, while HCLSoftware posted a standout 9.4% YoY growth with ARR reaching $1.05B. Deal wins remained healthy with TCV of $2.2B, and AI Force adoption is gaining traction across 25 clients. Management raised the lower end of FY25 revenue guidance to 3.5%-5% YoY (from 3%-3.5%), while maintaining EBIT margin guidance of 18%-19%. However, caution persists due to geopolitical risks, furloughs, and pressure in automotive and aerospace verticals. Wage hikes in Q3/Q4 will pressure margins by 65-80 bps and 50-60 bps respectively. The key risk is a sudden pullback in discretionary spending amid macro uncertainty.
HCLTech ने दूसरी तिमाही में अच्छा प्रदर्शन किया। कंपनी की कमाई पिछले साल की तुलना में 6.2% और पिछली तिमाही से 1.6% बढ़ी। मुनाफा भी बढ़ा और 18.6% हो गया, क्योंकि खर्च कम हुआ। सर्विसेज से कमाई 5.9% बढ़ी, और HCLSoftware ने 9.4% की बढ़त दिखाई। कंपनी को 2.2 अरब डॉलर के नए सौदे मिले। AI Force तकनीक 25 ग्राहकों के साथ लोकप्रिय हो रही है। कंपनी ने इस साल की कमाई वृद्धि का अनुमान 3.5% से 5% तक रखा है। लेकिन भू-राजनीतिक जोखिम, छुट्टियों और ऑटो व एयरोस्पेस क्षेत्रों में दबाव से सावधानी बरतनी होगी। वेतन वृद्धि से अगली तिमाहियों में मुनाफा 65-80 आधार अंक और 50-60 आधार अंक तक घट सकता है।
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Risk Intelligence
Geopolitical and macro uncertainty could impact discretionary spending
View Risks →
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Read Transcript →Quarter Snapshot
Total Contract Value (TCV) of new bookings
$2.2B
Not disclosed
Total deal wins in Q2, including 12 services and 8 software deals, with a good mix of small and large deals.
HCLSoftware ARR
$1.05B
Not disclosed
Annual Recurring Revenue for HCLSoftware, demonstrating steady progress in the software business.
Client additions in $50M+ category
4 clients
Not disclosed
Added 4 clients in the $50 million+ category QoQ, reflecting strong cross-sell and client expansion.
AI Force client adoption
25 clients
Not disclosed
AI Force platform implemented in at least 25 clients, with strong CIO sponsorship and growing adoption.
What Changed vs Last Quarter
NEW
Services revenue growth guidance of 3.5%-5% YoY in CC
Services revenue growth for FY25 is also expected between 3.5% and 5% year-on-year in constant currency.
NEW
Wage hike impact of 65-80 bps in Q3 and additional 50-60 bps in Q4
Wage hikes will impact margins by 65-80 basis points in Q3 and a further 50-60 basis points in Q4.
UPDATED
FY25 revenue growth guidance raised to 3.5%-5% YoY in CC
Overall revenue growth for FY25 is now expected between 3.5% and 5% year-on-year in constant currency, revised up from 3%-3.5%.
UPDATED
EBIT margin guidance unchanged at 18%-19%
EBIT margin for FY25 is maintained at 18%-19%, despite wage hike impacts in H2.
DROPPED
Q2 FY25 sequential growth expected across all verticals except Financial Services
Management expects Q2 to show sequential growth in all verticals and geographies except Financial Services, which will be impacted by the State Street JV exit.
DROPPED
Plan to train 50,000 employees on GenAI/AI skills in FY25
HCLTech targets training 50,000 employees on GenAI and AI skills this fiscal year; 33% of this target was achieved in Q1 alone.
NEW RISK
Geopolitical and macro uncertainty could impact discretionary spending
Management cited geopolitical factors and global economic conditions as potential headwinds, and noted that discretionary spending can turn quickly.
NEW RISK
Pressure in automotive and aerospace verticals
Automotive, especially in Europe, is under stress with program cancellations; aerospace may also see impact from client-specific issues.
NEW RISK
Furloughs and seasonal weakness in H2
Management assumes similar furloughs as last year, which could limit sequential growth in Q3 and Q4.
NEW RISK
Headcount decline despite revenue growth
Net headcount declined even as revenue grew, raising questions about scalability and future hiring needs.
RISK GONE
Automotive sector weakness in Europe
Softness in the automotive segment, especially in Europe, led to a sharp decline in ASAP acquisition revenue and impacted Manufacturing vertical performance.
RISK GONE
Discretionary spending recovery uncertain
Management noted that discretionary spend has not picked up meaningfully, and recovery depends on macro factors like interest rates and inflation.
RISK GONE
Competitive intensity driving irrational pricing on GenAI deals
CVK highlighted that competitive intensity, more than client expectations, is leading to irrational behavior in pricing for GenAI-related contracts.
RISK GONE
State Street JV exit impact on Q2 revenue
The State Street BPO JV divestiture will cause an 80bps revenue impact at the company level and 90bps at the services level in Q2.
🤫 Topics management stopped discussing
Mentioned in Q1 FY25, Q4 FY24
Management noted that discretionary spend has not picked up meaningfully, and recovery depends on macro factors like interest rates and inflation.
Mentioned in Q3 FY24, Q4 FY24
Operating margin guidance for FY25 is maintained at 18-19%, consistent with FY24 actuals, with no specific timeline to reach the aspirational 20% level.
Mentioned in Q2 FY24, Q3 FY24
Wage hikes impacted services margins by 65 bps in Q3, and Q4 will see a smaller impact of 20-25 bps.
Fast read
Guidance and risk preview
Overall revenue growth for FY25 is now expected between 3.5% and 5% year-on-year in constant currency, revised up from 3%-3.5%.
Management cited geopolitical factors and global economic conditions as potential headwinds, and noted that discretionary spending can turn quickly.
View Risks →