HCL Technologies Limited — Q4 FY26 earnings call

Call held 24 Apr 2026

Management summary

HCL Technologies reported a mixed Q4 FY26 with revenue decline QoQ, primarily due to software seasonality and client-specific issues, but annual revenue grew 3.9% CC. The company provided a cautious FY27 guidance of 1-4% CC revenue growth, citing ongoing discretionary spend softness and client challenges. AI momentum remains strong, with significant deal wins and an extended capital allocation policy reaffirming shareholder returns.

Highlights

  • FY26 consolidated revenue grew 3.9% in constant currency to $14.7 billion.

  • FY26 TCV of net new bookings reached $9.3 billion, same as last year, despite AI deflation.

  • Advanced AI revenue for Q4 grew 6.1% QoQ to $155.1 million, with annualized Advanced AI revenue reaching $620 million for FY26.

  • HCLTech named to Fortune's World's Most Admired Companies 2026 list.

  • Capital allocation policy extended for another 5 years, committing to return at least 75% of Net Income to shareholders.

Concerns

  • Q4 FY26 revenue declined 3.3% QoQ to $3.7 billion, and software business declined 28% sequentially.

  • FY26 operating margin (EBIT) dipped 107 basis points YoY to 17.2%.

  • FY27 guidance includes a ~50 basis points growth headwind from two client-specific challenges in America.

  • Software business experienced delays in procurement decisions and client stakeholder changes in Q4, leading to lower-than-expected revenue.

Key financials

2 periods

Headline

  • Revenue
    3.7 Bn
    YoY +2.4% QoQ -3.3%
  • EBIT Margin
    16.5%
  • Net Income
    486 Mn

FY26

  • Revenue
    14.7 Bn
    YoY +3.9%
  • EBIT Margin
    17.2%
    YoY -1.1%
  • Net Income
    1,959 Mn

What they filed

Q1 FY27: revenue up 13.9%, net profit up 20.3% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue28,862 29,890 30,246 30,349 31,942 +11%33,872 +13%33,981 +12%34,579 +14%
EBITDA6,369 6,860 6,482 6,035 6,545 +3%7,412 +8%6,712 +4%6,870 +14%
Net profit4,237 4,594 4,309 3,844 4,236 −0%4,082 −11%4,490 +4%4,626 +20%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Services Business (Q4)
    0.042 yoy_cc Revenue Growth-0.001 qoq_cc Revenue Growth
  • Software Business (Q4)
    -0.14 yoy_cc Revenue Growth-0.28 qoq_cc Revenue Growth
  • Advanced AI Revenue (Q4)
    155.1 Mn Revenue6.1% Revenue Growth
  • IT and Business Services (FY26)
    0.037 yoy_cc Revenue Growth
  • Engineering and R&D Services (FY26)
    0.098 yoy_cc Revenue Growth
  • HCL Software (FY26)
    1.4 Bn Revenue-0.041 yoy_cc Revenue Growth
  • Annual Recurring Revenue (Software FY26)
    1.05 Bn Revenue-0.005 yoy_cc Revenue Growth
  • USA (Q4)
    4.9% Revenue Growth
  • Europe (Q4)
    -2.9% Revenue Growth
  • Rest of the World (Q4)
    16.6% Revenue Growth
  • India (Q4)
    5.3% Revenue Growth
  • Technology and Public Services (Q4)
    17.8% Revenue Growth10.7% Revenue Growth

Order book

high confidence

Total value

$9.3 Bn

as of 2026-03-31 quantified

0% YoY

Inflow this quarter

$1.9 Bn

Cancellations & deferrals

  • cancelled: Two SAP programs discontinued, impacting revenue.
  • descoped: Discretionary spend cut by select Telecom customers (two large clients in the U.S.) impacting revenue.
  • deferred: Delay in procurement decisions in March, impacting Q4 revenue.
  • deferred: Situation in West Asia led to deferral in client decision-making for software segment.
AI momentum remained strong with nearly all deals incorporating an AI or GenAI component. TCV for the year was flat YoY despite AI deflation.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Net $3.51 Bn
    Our balance sheet continues to strengthen with gross cash at $3.53 billion and net cash at $3.51 billion.
  • Dividend ₹24/share (interim) Payout ratio 97.6%
    The Board has declared an interim dividend of INR24 per share for the quarter. The record date is 25th of April '26, and the payment of the same shall be on 5th of May'26. That brings our last 12 months payout to INR60 per share, effectively distributing 97.6% of our Net Income.
  • M&A Finergic Solutions Acquisition · Signed

    Enhance Financial Services portfolio, adding specialized capabilities in core banking and wealth management transformation.

    We signed a definitive agreement to acquire Finergic Solutions, a boutique wealth consulting firm headquartered in Singapore.
  • M&A Wobby Acquisition · Closed

    Augment data offerings in software space with data intelligence AI offering.

    This quarter we also completed the acquisition of Wobby, a data intelligence Al offering to augment our data offerings in our software space.
  • M&A Telecom Solutions Group from HPE Acquisition · Pending regulatory
    This guidance does not include the two acquisitions, the Telecom Solutions Group from HPE that we announced to carve-out and Jaspersoft. Both of these are not closed yet. They are delayed due to the US government approval that's delayed due to the US government shutdown of the specific departments.
  • M&A Jaspersoft Acquisition · Pending regulatory
    This guidance does not include the two acquisitions, the Telecom Solutions Group from HPE that we announced to carve-out and Jaspersoft. Both of these are not closed yet. They are delayed due to the US government approval that's delayed due to the US government shutdown of the specific departments.
  • Liquidity Cash $3.53 Bn
    Our balance sheet continues to strengthen with gross cash at $3.53 billion and net cash at $3.51 billion.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY27 · High confidence 1% to 4%
    Now coming to guidance, our guidance for FY'27 is as follows. The revenue growth guidance for the full year is 1% to 4% in constant currency and 1.5% to 4.5% for Services.

    — C. Vijayakumar

  • Services Revenue Growth Revenue · FY27 · High confidence 1.5% to 4.5%

    — C. Vijayakumar

Margin

  • EBIT Margin Margin · FY27 · High confidence 17.5% to 18.5%
    EBIT margin guidance is 17.5% to 18.5%.

    — C. Vijayakumar

Shareholder Returns

  • Net Income Return to Shareholders Shareholder Returns · next 5 years · High confidence at least 75%
    committed to return at least 75% of our Net Income back to the shareholders over the next 5 years.

    — Shiv Walia

AI Services

  • AI Native Services Growth AI Services · Medium confidence 25% to 30%
    We really look forward to growing our Al native services in the 25% to 30% range.

    — C. Vijayakumar

What to watch in Q1 FY27

FY27 Revenue Growth (CC)

next quarter (Q1 FY27)
Current 1% to 4% guidance
Target Performance within or above guidance range, especially H1 pick-up

Why it matters

To assess if the anticipated pick-up in discretionary spend and large deals materializes, validating the higher end of guidance.

At the higher end, moderate pick-up in discretionary spend and couple of large deals materializing in the first half.

Risks & concerns

  • Client-specific growth headwinds in America

    high

    Two client-specific challenges in America would cause close to 50 basis points growth headwind in FY27 due to significant IT budget scale-downs.

    Management acknowledged

  • Uncertain outlook and tariff volatility

    medium

    FY'26 unfolded with an uncertain outlook and persistent tariff volatility.

    Management acknowledged

  • Discretionary spending contraction

    medium

    Discretionary spending contracted in traditional areas, impacting revenue.

    Management acknowledged

  • AI-driven deflation in services

    medium

    3-5% deflation expected in AI-disrupted services, translating to 2-3% for HCLTech's portfolio.

    Management acknowledged

  • Softness in Europe

    medium

    Some softness observed in Europe, impacting growth outlook.

    Management acknowledged

  • US government approval delays for acquisitions

    low

    Acquisitions of HPE Telecom Solutions Group and Jaspersoft are delayed due to US government approval processes.

    Management acknowledged

Q&A highlights

5 direct
Impact of AI on deflation and specific AI offerings Direct
In terms of new services, I think that's a great question. We have obviously called out 5 key areas, which is Physical Al, Al Factory, Custom Silicon Engineering for Inferencing, Al-led Marketing Services, and IP and Platforms. Of course, IP and platforms are integral to a lot of service transformation. It has a very small component of IP embedded into it. Al Factory is where we are seeing tremendous traction.

Analyst questioned the long-term impact of AI-driven deflation and sought clarity on which AI offerings would drive growth to offset it, providing insight into HCLTech's strategic focus areas.

Asked by Abhishek Pathak

Guidance softness drivers (geopolitics vs. specific events) Direct
Of course, there has been some impact in March, which is what is reflected in our significantly lower revenue in Q4. And as I said, two large Telecom clients have cut down on the discretionary spent for this calendar year. I see that continuing till end of the year. A couple of SAP programs got discontinued. That will also have an impact.

Clarified that the guidance softness is primarily due to specific client issues and program discontinuations rather than broad geopolitical pressures, helping investors understand the localized nature of the headwinds.

Asked by Abhishek Pathak

Overlap between SAP program cancellations and Telecom client issues Direct
Two Telecom clients and the two other clients are completely different. The two other clients where there is a half-a-percent decrease in FY'27 guidance, one is a large Manufacturing client, other one is a Retail client. So there is no overlap in these clients.

Addressed concerns about potential systemic issues by confirming that the client challenges are distinct and not overlapping, suggesting they are isolated incidents rather than a broader vertical or technology trend.

Asked by Sudheer Guntupalli

Full quarter impact of Telecom issues in Q1 FY27 Direct
Yes, I wouldn't say that it was only in March, though the decision got communicated to in March, but it does have a little more impact than just one month because I think these were the SOWs which were expected as a part of CY'26 spend, and it was dragging and finally it was called off. I would say it's a little more than a month. We are assuming at least that it is there till end of the year and that is all accounted in our guidance.

Provided clarity on the duration and extent of the impact from the Telecom client issues, confirming it's more than a one-month effect and is factored into the full-year guidance.

Asked by Nitin Padmanabhan

Long-term trajectory of the products business (Software) Direct
Firstly, this Q4 revenue decline is not related to anything on Al or any of the latest developments. As you know, the last fortnight of the quarter is crucial for all the deal closures in the Software segment. I think the situation in West Asia led to deferral in client decision-making and some of the delays in the US government also caused this. We expected it to get done before March, but they didn't get done.

Explained the specific, non-AI related reasons for the Q4 software decline, reassuring investors about the underlying health and long-term trajectory of the software business despite short-term headwinds.

Asked by Nitin Padmanabhan

2 min read 6 chapters

Detailed narrative

Q4 FY26 Performance Overview

HCLTech reported Q4 FY26 revenue of $3.7 billion, marking a 3.3% sequential decline but a 2.4% YoY increase in constant currency. The services business saw a marginal sequential decline of 0.1% but grew 4.2% YoY, while the software business experienced a significant 28% sequential and 14% YoY decline. Operating margin for the quarter was 16.5%, which would have been 17.7% excluding restructuring costs, impacted by seasonality in software and delayed procurement decisions in March.

FY26 Annual Performance Highlights

For the full fiscal year 2026, HCLTech achieved a consolidated revenue of $14.7 billion, representing a 3.9% growth in constant currency. The services business grew 4.8%, with IT and Business Services up 3.7% and Engineering and R&D Services up 9.8%. The HCL Software revenue stood at $1.4 billion, declining 4.1%. The annual operating margin (EBIT) was 17.2%, a 107 basis points dip YoY, though 17.9% when adjusted for restructuring costs.

AI Strategy and Momentum

AI continues to be a strong focus, with nearly all new deals incorporating an AI or GenAI component. Advanced AI revenue for Q4 reached $155.1 million, growing 6.1% QoQ, and annualized Advanced AI revenue for FY26 was $620 million. HCLTech is actively deploying AI across delivery and operations, with its AI Force platform now in 75 accounts. The company is building differentiated AI IP, expanding AI-led services, strengthening partnerships, and training 135,000 employees in GenAI technologies.

Client and Geographic Performance

In terms of client additions, HCLTech added 1 client in the $100 million+ category, 8 in the $50 million+ category, and 11 in the $20 million+ category YoY. Geographically, Q4 saw USA grow 4.9% YoY and ROW grow 16.6% YoY, while Europe declined 2.9% YoY. Technology and Public Services verticals led growth at 17.8% and 10.7% YoY respectively, with 6 out of 7 verticals showing YoY growth.

Capital Allocation and Shareholder Returns

The Board declared an interim dividend of INR 24 per share for Q4 FY26, with a record date of April 25, 2026. The last 12 months payout was INR 60 per share, distributing 97.6% of Net Income. The capital allocation policy has been extended for another 5 years, committing to return at least 75% of Net Income to shareholders. Over the last 5 years, $8.5 billion has been returned to shareholders.

FY27 Outlook and Guidance

HCLTech provided FY27 revenue growth guidance of 1% to 4% in constant currency, with Services revenue expected to grow between 1.5% and 4.5%. The EBIT margin guidance is set at 17.5% to 18.5%. This guidance factors in continued soft discretionary spending and a ~50 basis points growth headwind from two specific client challenges in America, as well as the discontinuation of two SAP programs. The guidance does not include potential contributions from the pending acquisitions of HPE Telecom Solutions Group and Jaspersoft.

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