HCL Technologies’ deal bookings in June quarter remained subdued

 HCL Tech (HCLT) reported in-line revenue growth of +1.3% Q-o-Q (quarter-on-quarter) in USD terms, though its margin performance fell short of expectations. IT services revenue remained flat sequentially, while ER&D revenue declined by -0.5% Q-o-Q in constant currency (CC) terms, and the software segment saw a sharper drop of -7.1% Q-o-Q. Profit after tax increased year-on-year by 0.4% in the June quarter.

Deal bookings were subdued in Q1 at USD 1.8bn (-39% QoQ / -8% YoY), primarily due to the postponement of two large deals to Q2. These delays are not linked to external factors, and HCLT remains confident about their closure, anticipating an improvement in TCV in Q2FY26E.

The company continues to gain traction in digital and engineering services, driven by its engineering-led strategy and strong client confidence in its AI and data/AI capabilities. Reflecting Q1 performance and a positive outlook for the rest of the year, HCLT has revised its FY26E revenue growth guidance upward to 3-5% YoY CC (from 2-5% previously). However, it has lowered its margin guidance to 17-18% (from 18-19%) due to a client bankruptcy in Q1; increased investments in Sales & Marketing and AI; and ongoing restructuring efforts. Despite short-term margin pressures, HCLT remains focused on long-term growth leadership and aims to return to its aspirational margin range.

 Disclaimer: This content is only for informational purpose. It does not make any recommendation to act or invest. To get any error corrected, please write to content@hdfcsec.com.

Source: HDFC Securities Institutional Equities

https://www.hdfcsec.com/hsl.docs/HSIE%20Results%20Daily%20-%2015%20Jul%2025%20-%20HSIE-202507150630217618423.pdf?t=1572025632586