Detailed narrative
HCL Technologies concluded FY25 with a consolidated revenue of $13.84 billion, marking a 4.7% constant currency growth year-on-year. The operating margin for the full year stood at 18.3%, a modest 7 basis points improvement over FY24. For the fourth quarter of FY25, total revenue was $3,494 million, experiencing a sequential decline of 0.8% but growing 2.9% year-on-year in constant currency. The Q4 operating margin was 17.9%. Net income for FY25 was $2,041 million (14.7% of revenues), and diluted EPS for the last 12 months was Rs. 64.09, up 10.8% YoY. The company declared an interim dividend of Rs. 18 per share, bringing the total 12-month payout to Rs. 60 per share, distributing 93.5% of net income.
The Services business was a key growth driver, achieving a 4.8% constant currency growth in FY25, outpacing similar-sized peers for the third consecutive year. This was led by IT and Business Services (4.6% growth) and Engineering and R&D Services (5.5% growth). HCL Software also demonstrated strong performance with 3.5% growth, reaching an Annual Recurring Revenue (ARR) of $1.03 billion. Geographically, all three major regions grew in FY25: Americas (5.3%), ROW (4.7%), and Europe (3.5%). Verticals like Telecom, Media and Publishing (43.4%), Retail & CPG (10.7%), and Technology and Services (6.7%) showed strong performance. The company added 6 customers in the $50 million category and 1 in the $20 million category.
HCLTech reported a strong booking quarter with $3 billion in net-new TCV, bringing the total for FY25 to $9.3 billion. Engineering and R&D Services had a record high booking, growing 75% in FY25. The company is heavily investing in AI and Generative AI, with 57 AI Force deployments across 22 clients and 500 AI/GenAI engagements for 400 clients in FY25. New offerings like Assure AI and 3D IIP were launched. HCLTech also established HCLTech Public Sector Solutions to expand market participation in the US public sector. Talent transformation efforts included training over 100,000 users and 4,000 developers in AI/GenAI. The company highlighted its focus on non-linearity, with revenue growing 4.7% in Services while headcount declined by roughly 2%.
Management expressed cautious optimism for FY26, providing a revenue growth guidance of 2% to 5% in constant currency and an EBIT margin guidance of 18% to 19%. They acknowledged continued uncertainty in the global economy, reduced discretionary spending, and potential macroeconomic challenges🌐, including geopolitical factors. However, they believe HCLTech is well-positioned to capitalize on emerging opportunities due to its diverse portfolio and AI-led transformation capabilities. They anticipate a "usual seasonality" in Q1 FY26, though better than the previous year, and expect an additional ~1% impact on FY26 guidance due to the CTG acquisition.
During the Q&A, management reiterated concerns about the environment potentially deteriorating, which is factored into the lower end of their FY26 guidance. They noted that while they haven't seen a direct impact from potential tariffs yet, discretionary spending remains subdued, requiring strong ROI justifications for new technology projects. The decline in North America in Q4 was attributed to the completion of a large Retail CPG program, which was anticipated. There was discussion around whether cost takeout initiatives would be AI-driven, with management confirming that AI and modernization are integral to efficiency benefits, rather than pure cost optimization. A significant highlight was the strong Q4 booking of $3 billion, the second highest after the September 2023 mega deal quarter, indicating robust deal conversions. The 75% growth in ER&D bookings for FY25 was also a positive surprise, demonstrating strong execution in a segment often considered discretionary.