HCL Technologies (HCL Tech) has reported its financial results for the first quarter, showcasing resilience in revenue growth while facing some margin pressure. The company remains confident in its long-term prospects and reaffirmed its margin goals.

Revenue Growth

HCL Tech reported consolidated revenue of ₹30,349.00 crores for Q1, representing a year-on-year growth of 8.2% in Indian Rupees. In constant currency terms, the company achieved a 3.7% year-on-year growth. The IT and Business Services segment, which accounts for the largest share of revenue, grew by 3.0% year-on-year in constant currency.

Profitability

The company's EBIT (Earnings Before Interest and Taxes) for the quarter stood at ₹4,942.00 crores, translating to an EBIT margin of 16.3%. This represents a decline from the 18.0% EBIT margin reported in the previous quarter. Net income for Q1 was ₹3,843.00 crores, down 10.8% quarter-on-quarter and 9.7% year-on-year.

Segment Performance

The Engineering and R&D Services segment showed strong growth, while the HCL Software segment experienced a slight decline.

Long-Term Outlook

Despite the temporary margin pressure, HCL Tech has reaffirmed its long-term margin goals of 19-20%. The company expressed confidence in meeting its updated guidance for the current year, citing expected revenue growth and a strong booking outlook.

Dividend Declaration

The Board of Directors has declared an interim dividend of ₹12.00 per equity share.

Management Commentary

C Vijayakumar, CEO & Managing Director of HCL Tech, stated, "We had healthy revenue growth of 3.7% YoY supported by good performance in our Services business with 4.5% YoY growth in constant currency. Our operating margin came at 16.3%, impacted by lower utilization and additional Gen AI and GTM investments. Our AI propositions are resonating well with our clients and have been augmented further by our partnership with Open AI."

Future Outlook

HCL Tech has provided guidance of 3.0% - 5.0% year-on-year revenue growth in constant currency for both the company overall and its Services business. The EBIT margin is expected to be between 17.0% – 18.0%.

HCL Tech's ability to maintain revenue growth while investing in emerging technologies like AI demonstrates its commitment to long-term value creation. The company's focus on innovation and strategic partnerships positions it well to capitalize on the evolving technology landscape and drive future growth.

HCL Technologies (HCLTech), a leading global technology company, has reported its financial results for the first quarter, showcasing steady growth amid a shifting market landscape.

Revenue Growth and Performance

For Q1, HCLTech posted consolidated revenue of ₹30,349.00 crores, marking a 8.2% year-on-year (YoY) increase and a modest 0.3% quarter-on-quarter (QoQ) growth. In constant currency terms, the company achieved a 3.7% YoY growth, slightly outpacing its services business which grew at 4.5% YoY.

Profitability

The company's EBIT (Earnings Before Interest and Taxes) for the quarter stood at ₹4,942.00 crores, representing 16.3% of revenue. This indicates a 9.2% decrease QoQ and a 3.1% increase YoY. Net income came in at ₹3,843.00 crores, or 12.7% of revenue, showing a 10.8% decline QoQ and a 9.7% decrease YoY.

Segment Performance

HCLTech's IT and Business Services segment, which forms the core of its operations, generated revenue of ₹22,454.00 crores, growing 3.0% YoY in constant currency. The Engineering and R&D Services segment showed strong performance with 11.8% YoY growth, while the HCL Software segment experienced a slight decline of 3.0% YoY.

Revised Outlook

In light of the quarter's performance and future outlook, HCLTech has updated its forecasts:

• The company now expects overall revenue growth to be between 3.0% - 5.0% YoY in constant currency.
• Services revenue growth is also projected at 3.0% - 5.0% YoY in constant currency.
• HCLTech has lowered its EBIT margin forecast to 17.0% - 18.0%, down from the previous range of 18% - 19%.

Strategic Initiatives and Market Position

C. Vijayakumar, CEO & Managing Director of HCLTech, commented on the results: "Our AI propositions are resonating well with our clients and have been augmented further by our partnership with Open AI. Our pipeline continues to grow as the demand environment was stable during the quarter."

The company highlighted its strong position in the AI market, with Vijayakumar noting, "HCLTech's capabilities and strategic partnerships ensure our AI-led solutions are practical, comprehensive and significant value creators to our clients."

Dividend and Financial Health

The Board of Directors has declared an interim dividend of ₹12.00 per share, marking the 90th consecutive quarter of dividend payout. HCLTech maintains a robust financial position with free cash flow at $2,421.00 million on a last twelve months (LTM) basis, representing 121% of net income.

Conclusion

While HCLTech has shown resilience with continued revenue growth, the lowered margin forecast suggests challenges in maintaining profitability amid market pressures. The company's focus on AI and strategic partnerships appears to be a key driver for future growth as it navigates the evolving technology landscape.

Note: All financial figures are in Indian Rupees (₹) unless otherwise stated.