HCLTech beats Q1 estimates, enters data center business
India's HCLTech beat first-quarter expectations on strong financial services demand but disappointed some investors by keeping its annual forecast unchanged despite a record deal pipeline and a new push into data centers.
HCLTech reported a 13.9% year-on-year revenue increase to 345.79 billion rupees ($3.62 billion) for the June quarter, surpassing the 343.5 billion rupee consensus estimate. Stripping out currency effects, constant currency revenue grew 2.6%.
The outperformance stemmed primarily from robust demand in the financial services sector and a favorable foreign exchange impact. Because the company bills clients in foreign currencies but incurs most costs in rupees, a weaker domestic currency padded the top line.
The results arrive as analysts downgrade projections across India's $315 billion IT sector. Global clients are slashing discretionary tech budgets, while advanced AI tools threaten to disrupt traditional software models. Reflecting this pressure, HCLTech reduced its headcount by over 3,000, marking the steepest drop in eight quarters.
Despite the macro headwinds, CEO C Vijayakumar pointed to a record $2.4 billion in first-quarter deal wins. "There has been some impact due to West Asia (conflict), which started in March, and some of that is continuing. Some of the discretionary spend softness continues to be there, but we see a large pipeline, very healthy booking. We expect strong booking even in Q2," he said.
However, the market focused on the lack of upward revisions to the fiscal year 2027 revenue guidance. "It's a good set of numbers, but the FY27 guidance has not increased or narrowed. That was the biggest monitorable, particularly because the company won a $1.14 billion deal this month. From that perspective, this was slightly disappointing," said Sushovon Nayak, analyst at Anand Rathi.
Looking beyond traditional services, HCLTech announced plans to enter the data center market with a 35 billion rupee investment aimed at building up to 50 megawatts of capacity. "While the investment could modestly weigh on cash flows in the near term, it positions HCLTech to participate across the full AI value chain," said StoxBox research analyst Sagar Shetty.
