HCLTech Q3 Net Profit Falls 3.8% Due to One-Time Labour Code Impact
HCL Technologies reported Q3 net profit of ₹4,076 crore, down 3.8% QoQ due to ₹956 crore one-time impact from new labour codes implementation. Revenue grew strongly by 6% to ₹33,872 crore, exceeding estimates, while EBIT increased 14.2% to ₹6,285 crore. The advanced AI segment delivered nearly 20% QoQ growth, and the order book expanded 17% sequentially to $3 billion. The company revised FY guidance with revenue growth narrowed to 4%-4.5% and upgraded services revenue outlook to 4.75%-5.25%.
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HCL Technologies shares declined over 1.6% to ₹1,639.90 following the company's third-quarter results, which showed a sequential decline in net profit due to one-time impacts from new labour code implementation. The IT services major reported mixed results with strong revenue growth offset by profit pressures from regulatory changes.
Financial Performance Overview
The company's consolidated financial performance for the October-December period reflected both operational strength and regulatory headwinds:
| Metric | Q3 Performance | Previous Quarter | Change | Estimate |
|---|---|---|---|---|
| Revenue | ₹33,872 crore | ₹31,942 crore | +6.0% | ₹33,201 crore |
| Net Profit | ₹4,076 crore | ₹4,235 crore | -3.8% | ₹4,702 crore |
| EBIT | ₹6,285 crore | ₹5,502 crore | +14.2% | ₹6,054 crore |
| EBIT Margin | 18.6% | 17.2% | +140 bps | 18.2% |
The revenue growth of 6% quarter-on-quarter exceeded analyst estimates, while the net profit decline was primarily attributed to one-time regulatory impacts rather than operational weakness.
New Labour Codes Impact
The implementation of New Labour Codes created a significant one-time financial impact during the quarter. The regulatory changes led to an increase in employee benefit provisions estimated at ₹956 crore, directly affecting the company's bottom line. Additionally, the operating margin included an 81 basis points impact from restructuring costs, further pressuring profitability metrics.
Business Segment Performance
HCL Technologies demonstrated strong performance across key business segments, with notable growth in emerging technology areas:
| Business Unit | Performance | Growth Rate |
|---|---|---|
| HCLSoftware | Strongest performer | +28.1% QoQ |
| IT Services | Steady growth | +1.5% QoQ (constant currency) |
| Advanced AI Segment | Revenue of $146 million | ~20% QoQ (constant currency) |
The advanced artificial intelligence segment emerged as a key growth driver, reaching $146 million in constant currency terms with nearly 20% quarter-on-quarter growth, highlighting the company's success in high-value technology services.
Order Book and Market Position
The company's order book performance demonstrated strong market demand and business momentum:
- Total order book: $3 billion in Q3
- Sequential growth: 17% quarter-on-quarter
- Annual growth: 43% year-on-year
This substantial order book expansion indicates robust client demand and positions the company well for future revenue growth across its service portfolio.
Revised Guidance and Outlook
HCL Technologies updated its full-year guidance, reflecting increased confidence in business performance:
| Guidance Parameter | Revised Range | Previous Range |
|---|---|---|
| Revenue Growth (constant currency) | 4%-4.5% | 3%-5% |
| Services Revenue Growth | 4.75%-5.25% | 4%-5% |
| EBIT Margin | 17%-18% | 17%-18% (unchanged) |
The company narrowed its revenue growth guidance to a tighter range while upgrading the services revenue outlook, indicating management's confidence in business trajectory. The EBIT margin guidance remains unchanged at 17%-18%, excluding the one-time impact of new labour codes.
Historical Stock Returns for HCL Technologies
| 1 Day | 5 Days | 1 Month | 6 Months | 1 Year | 5 Years |
|---|---|---|---|---|---|
| -0.14% | +3.58% | -0.48% | +1.64% | -16.30% | +56.78% |
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