India’s third largest software services exporter reported a 0.5% quarter on quarter (QoQ) decline in net profit at Rs 4,235 crore, beating ET estimates of Rs 4,097 crore. Better-than-expected performance in the first half of fiscal 2025 also gave the confidence to the firm to increase the lower end of the guidance. HCLTech revised its annual revenue guidance to 3.5-5% from its earlier range of 3-5% for fiscal 2025.
Joining its bigger peer Tata Consultancy Services (TCS), which cited some signs of improvement in the demand environment, HCLTech too mentioned better incremental demand across multiple verticals, and reported a revenue of Rs 28,862 crore, up 2.9% quarter on quarter (QoQ). Even on-year basis, the Q2 topline was 6.7% up.
The Noida-headquartered firm is the second Indian IT service provider to announce its Q2 earnings this season. Last week, bellwether TCS missed market estimates for Q2 posting a 1.08% quarter-on-quarter (QoQ) decline in net profit and revenue growth at 2.6%.
“Incrementally the demand was better. Services and overall revenue came in much higher than what we expected. So, that’s really good fulfilment of the demand that was coming our way across all the verticals,” said C Vijayakumar, CEO of HCLTech.
HCLTech’s revenue was also boosted by strong demand in financial services, technology services and a few other verticals, and execution of some of the deals signed in the past, Vijayakumar added.
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In addition, the software business grew robustly in the last month and even the last week of the quarter, delivering “stupendous performance, which overall helped the revenue growth to be better than what we expected” and also helped margins growth, added Vijayakumar. Margins improved by 150 bps sequentially. The company’s EBIT (earnings before interest and taxes) came at Rs 5,362 crore, up 11.8% QoQ and 8.7% YoY. The IT major saw an improvement in its margin in both services and software segments by 110 and 503 bps, respectively. However, a strong improvement of 500 bps improvement in the software segment of the business, didn’t see any change in the annual margin guidance of 18-19% for FY25.
Headcount
HCLTech continued to lower its headcount, yet at a slower pace, with a reduction of 780 employees during the September quarter. The total employee count at the end of September was 218,621.
