India's HCLTech narrows revenue forecast, sees demand stability

CNA

4 hours ago

BENGALURU :HCLTech, India's third-largest IT services provider, reported mixed quarterly results on Monday, where its revenue beat analyst estimates but profit fell more than expected.
The company's net profit for the June quarter fell 9.7 per cent from a year ago to 38.43 billion rupees. Meanwhile, its consolidated quarterly revenue rose 8.16 per cent to 303.49 billion rupees ($3.53 billion), surpassing analysts' average estimate of 302.92 billion rupees, according to data compiled by LSEG.
"The demand environment remained stable from an overall perspective, with some variations across specific verticals. It did not deteriorate as feared at the start of the quarter," HCLTech CEO C Vijayakumar said.
Uncertainty around tariffs in the U.S., the biggest market for India's $283-billion IT sector, has quashed hopes of a revival in client confidence and spending.
The company raised the lower end of its revenue growth forecast for fiscal year 2026 to between 3 per cent and 5 per cent from the prior view of 2 per cent to 5 per cent.
However, HCLTech lowered its annual operating margin forecast to a range of 17 per cent to 18 per cent from the previous projection of 18 per cent to 19 per cent.
"This revision indicates a cautious outlook on profitability amid ongoing cost and demand pressures," said Ambrish Shah, an analyst at Systematix.
Operating margin for the June quarter declined 80 basis points to 16.3 per cent, impacted by lower utilization due to a delay in the ramp-up of a specific program leading to larger bench strength, Vijayakumar said.
The company will also undertake a restructuring where it will seek to give up facilities it is not using, primarily in locations outside India, the CEO added.
There will also be a "talent rampdown" in some locations outside India, he added, but did not share specifics. The costs the company will incur as part of the restructuring are baked into its updated forecast, he said.
HCLTech's order bookings for the June quarter stood at $1.81 billion, compared with $1.96 billion in the year-ago period.
Four of its seven industry segments grew, while manufacturing, life sciences as well as healthcare and public service segments declined.
Industry leader Tata Consultancy Services missed its quarterly earnings estimates last week, leading to concerns of a prolonged lull in demand.