HCL Technologies is expected to report stronger sequential growth in the December quarter, with margins seen expanding on the back of software seasonality, even as wage hikes and restructuring costs weigh on profitability. The company will announce its quarterly results on Monday, with Bloomberg estimates pointing to significant improvements across key financial metrics.

Q3 Financial Expectations

Bloomberg estimates indicate robust quarter-on-quarter growth across all major financial parameters for HCLTech's December quarter performance.

Analyst Expectations and Key Focus Areas

Analysts will focus on the extent of margin expansion after factoring in the impact of wage hikes and restructuring costs, alongside any changes to FY26 revenue growth guidance and commentary on demand visibility for calendar year 2026.

Jefferies Outlook

Jefferies expects revenue to grow 2.90% quarter-on-quarter in constant currency, driven by seasonality in the software business and partly offset by furloughs. The services segment is expected to grow 1.00% sequentially, while the software segment may see sharp sequential growth. EBIT margin may expand by about 60 basis points, supported by high-margin software, offset by two months of wage hike impact and restructuring costs.

Investec and UBS Projections

Investec expects 2.40% quarter-on-quarter growth in constant currency and 2.30% growth in US dollar terms. Growth is expected to be driven by the products and platforms business, with services revenue growth of about 1.00% sequentially. Margins are expected to improve by around 100 basis points due to software seasonality, partly offset by an estimated 80 basis point impact from wage hikes.

UBS expects margin expansion due to strong software performance, though growth investments may cap upside. The firm expects HCLTech to maintain FY26 guidance.

Nuvama Analysis

Nuvama expects revenue growth of 2.40% quarter-on-quarter in constant currency and 2.20% growth in US dollar terms, driven by products and platforms growth of about 15.00% and services growth of around 1.00%. EBIT margin is expected to expand by around 110 basis points, aided by software seasonality and partly offset by restructuring expenses and wage hikes.

Key Monitoring Points

Analysts will be closely watching several critical areas during the results announcement:

• FY26 guidance revision possibilities
• Calendar year 2026 budget commentary
• Deal wins and pipeline updates
• Discretionary spending trends
• Impact of H-1B visa fee hike
• Demand visibility for the upcoming periods

The consensus among analysts suggests that software seasonality will be the primary driver of margin expansion, even as the company navigates challenges from wage increases and restructuring costs.

HCL Technologies Ltd is positioned to deliver a steady performance in its upcoming quarterly results, with analysts expecting the IT services giant to navigate seasonal challenges through strategic growth initiatives.

Expected Financial Performance

India's third-largest IT services provider is anticipated to report modest revenue growth of approximately 3% for the October-December quarter (Q3FY26). Along with this revenue expansion, the company is expected to demonstrate margin improvement during the reporting period.

Key Growth Drivers

Two primary factors are expected to support HCL Technologies' performance during the quarter:

• Deal Momentum: Strong pipeline execution and contract wins are anticipated to contribute to revenue stability
• AI Traction: Artificial intelligence initiatives and related service offerings are expected to provide growth impetus

These strategic areas are projected to help cushion the impact of seasonal softness typically experienced during this period.

Market Position

As India's third-largest IT services provider, HCL Technologies continues to maintain its significant position in the domestic technology sector. The company's ability to leverage emerging technologies like artificial intelligence while maintaining strong client relationships positions it for sustained growth despite seasonal market variations.

The upcoming quarterly results will provide insights into how effectively the company has executed its strategic initiatives and managed operational efficiency during a traditionally challenging period.

Source: https://www.cnbctv18.com/market/earnings/hcltech-q3-earnings-preview-deal-momentum-ai-traction-to-cushion-seasonal-softness-ws-l-19817202.htm