Skip to content

    HCL Technologies

    HCLTECH
    Information Technology·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

    5

    • 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

    4

    • 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

    Metrics

    6

    Periods

    2

    Headline

    3
    • Revenue
      $3.7B
      YoY+2.4%QoQ-3.3%
    • EBIT Margin
      16.5%
    • Net Income
      486 Mn

    FY26

    3
    • Revenue
      $14.7B
      YoY+3.9%
    • EBIT Margin
      17.2%
      YoY-1.1%
    • Net Income
      1,959 Mn

    Segment breakdown

    Services Business (Q4)
    4.2% Revenue Growth-0.1% Revenue Growth
    Software Business (Q4)
    -14.0% Revenue Growth-28.0% Revenue Growth
    Advanced AI Revenue (Q4)
    155.1 Mn Revenue6.1% Revenue Growth
    IT and Business Services (FY26)
    3.7% Revenue Growth
    Engineering and R&D Services (FY26)
    9.8% Revenue Growth
    HCL Software (FY26)
    1.4 billion Revenue-4.1% Revenue Growth
    Annual Recurring Revenue (Software FY26)
    1.05 billion Revenue-0.5% 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
    List

    Order Book

    high confidence

    Total Value

    USD 9.3 billion

    as of 2026-03-31

    quantified
    0.0% YoY

    Inflow this qtr

    USD 1.9 billion

    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

    7
    high confidence
    CategoryHeadline
    Debt

    Net USD 3.51 billion

    Dividend

    ₹24/share (interim)

    Payout ratio 97.6%

    M&A

    Finergic Solutions

    acquisition · signed

    M&A

    Wobby

    acquisition · closed

    M&A

    Telecom Solutions Group from HPE

    acquisition · pending regulatory

    Guidance & targets

    5
    CategoryTargetPriority
    Revenue
    Revenue Growth
    1% to 4%
    		High
    Revenue
    Services Revenue Growth
    1.5% to 4.5%
    		High
    Margin
    EBIT Margin
    17.5% to 18.5%
    		High
    Shareholder Returns
    Net Income Return to Shareholders
    at least 75%
    		High
    AI Services
    AI Native Services Growth
    25% to 30%
    		Medium

    FY27 Revenue Growth (CC)

    next quarter (Q1 FY27)
    Current1% to 4% guidance
    TargetPerformance 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.

    How to verify

    guidance_and_targets[metric='Revenue Growth']

    Risks & concerns

    6
    RiskSeverity

    Uncertain outlook and tariff volatility

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

    medium

    Discretionary spending contraction

    Discretionary spending contracted in traditional areas, impacting revenue. — Management acknowledged

    medium

    AI-driven deflation in services

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

    medium

    Client-specific growth headwinds in America

    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

    high

    Softness in Europe

    Some softness observed in Europe, impacting growth outlook. — Management acknowledged

    medium

    US government approval delays for acquisitions

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

    low

    Q&A highlights

    5

    “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

    2 min read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.