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HCL Technologies Ltd — Q4 FY26
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.
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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.
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Telecom discretionary spending cuts may persist
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Total Contract Value (TCV) of net new bookings
$9.3B
Flat YoY
Full-year TCV matched last year despite AI deflation and voluntary deal walkaways.
Advanced AI annualized revenue
$620M
+30% YoY (implied)
Annualized run-rate after two strong booking quarters; Q4 revenue $155M.
Clients >$100M
1 added
+1 YoY
Organic addition; total >$100M clients now at 24 (implied).
AI Force deployments
75 accounts
+50% YoY (approx)
AI transformation platform deployed across 75 accounts, up from ~50 last year.
What Changed vs Last Quarter
NEW
FY27 revenue growth 1-4% CC
Consolidated revenue growth guidance for FY27 in constant currency; services growth 1.5-4.5%.
NEW
FY27 EBIT margin 17.5-18.5%
Operating margin guidance for FY27, excluding impact of acquisitions.
NEW
Two clients to cause ~50bps growth headwind in FY27
Specific client reductions in manufacturing and retail will impact growth by about 50 basis points.
NEW
AI native services to grow 25-30%
Management expects advanced AI services (AI factory, custom silicon) to grow at 25-30% annually.
DROPPED
FY26 Services Revenue Growth Guidance Raised to 4.7%-5.25% CC
Full-year services constant currency growth guidance raised to 4.7%-5.25% from previous range, reflecting strong Q3 performance and bookings.
DROPPED
FY26 Overall Revenue Growth Guidance Raised to 4%-4.5% CC
Company-level constant currency growth guidance raised to 4%-4.5% for FY26.
DROPPED
FY26 EBIT Margin Guidance Maintained at 17%-18%
Full-year EBIT margin guidance remains at 17%-18%, inclusive of restructuring costs but excluding one-time labor code impact.
DROPPED
Ongoing Labor Code Cost Impact Minimal at 10-20 bps
Management expects minimal ongoing costs from new labor code, estimated at 10-20 basis points impact on margins.
NEW RISK
Telecom discretionary spending cuts may persist
Two large US telecom clients cut discretionary spend in Q4; impact expected to continue through calendar 2026.
NEW RISK
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.
NEW RISK
Software revenue volatility from government deals
Q4 software revenue missed due to delayed US government decisions; timing of closures unpredictable.
RISK GONE
Persistent Softness in Discretionary Spending
Traditional discretionary spending remains soft, and management is not expecting a rebound to pre-COVID levels, focusing instead on emerging AI-related spend.
RISK GONE
Life Sciences & Healthcare Vertical Weakness
Life Sciences and healthcare vertical continues to show weakness due to U.S. healthcare sector pressure, with management expecting stabilization in a couple of quarters.
RISK GONE
GCC Expansion Impacting Outsourcing
Rise of Global Capability Centers (GCCs) in India may structurally change outsourcing opportunities, though management sees it as a net opportunity.
🤫 Topics management stopped discussing
Mentioned in Q1 FY26, Q2 FY26, Q3 FY26
Full-year services constant currency growth guidance raised to 4.7%-5.25% from previous range, reflecting strong Q3 performance and bookings.
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
Consolidated revenue growth guidance for FY27 in constant currency; services growth 1.5-4.5%.
Two large US telecom clients cut discretionary spend in Q4; impact expected to continue through calendar 2026.
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