HCL Technologies: Q1 Profit Dips 10%, AI Team Underutilization Impacts Margins
HCL Technologies reported a 10% YoY decline in Q1 net profit to ₹3,843.00 crore, below market estimates. Revenue increased 8% to ₹30,349.00 crore. EBIT fell 9% QoQ to ₹4,942.00 crore, with margin decreasing to 16.35%. One-third of AI team underutilized, impacting margins. Board declared ₹12.00 per share interim dividend. Company projects 3-5% YoY revenue growth and 17-18% EBIT margin for the fiscal year. Plans to increase hiring for FY26.

*this image is generated using AI for illustrative purposes only.
HCL Technologies Limited (HCL Tech), a leading global technology company, has announced its financial results for the first quarter, along with a dividend declaration and insights into its AI team utilization.
Financial Performance
HCL Tech reported a consolidated net profit of ₹3,843.00 crore for Q1, marking a 10% year-on-year decline. This figure fell below market estimates. However, the company's revenue from operations saw an 8% increase, reaching ₹30,349.00 crore, which was marginally above expectations.
Segment-wise Performance
The company's performance across its business segments for Q1 was as follows:
Segment | Revenue (₹ crore) | Segment Results (₹ crore) |
---|---|---|
IT and Business Services | 22,454.00 | 3,393.00 |
Engineering and R&D Services | 5,174.00 | 916.00 |
HCL Software | 2,721.00 | 633.00 |
Profitability Metrics
The company's EBIT (Earnings Before Interest and Taxes) for Q1 stood at ₹4,942.00 crore, down 9% sequentially from ₹5,442.00 crore in the previous quarter. Consequently, the EBIT margin decreased to 16.35% from 17.99% in the last quarter.
AI Team Utilization Challenges
HCL Technologies reported that one-third of its AI-focused team is currently underutilized, resulting in an 80 bps impact on margins. The company expects these utilization challenges to moderate in Q2 and Q3, with a projected 10-20 bps full-year margin drag.
Dividend Announcement
HCL Tech's Board of Directors has declared an interim dividend of ₹12.00 per equity share. The record date for this dividend is set for July 18, with the payment scheduled for July 28.
Future Outlook
Looking ahead, HCL Tech has provided guidance for the fiscal year. The company projects revenue growth of 3-5% year-on-year in constant currency. Additionally, the EBIT margin is expected to be between 17-18%.
Hiring Plans
HCL Technologies plans to increase hiring for FY26, focusing on specialized roles and freshers to support its growth strategy and address the evolving needs of the technology sector.
Management Commentary
C. Vijayakumar, Chief Executive Officer and Managing Director of HCL Technologies, stated, "Our Q1 results reflect the ongoing global economic challenges, but we remain focused on delivering value to our clients through our comprehensive range of services and solutions."
Looking Ahead
While the company faces headwinds in the form of reduced profits and AI team underutilization, the increase in revenue suggests resilience in HCL Tech's business model. The company's diverse portfolio across IT services, Engineering R&D, and software products continues to provide a balanced approach to navigating market fluctuations.
Investors and market analysts will be keenly watching how HCL Tech adapts its strategies to improve profitability and AI team utilization while maintaining growth in the coming quarters, especially in light of the provided guidance and hiring plans.
Historical Stock Returns for HCL Technologies
1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
---|---|---|---|---|---|
-1.13% | -5.30% | -5.99% | -10.68% | +3.20% | +173.92% |