Hexaware Technologies Limited — Q3 FY26 earnings call

Call held 10 Feb 2026

Management summary

Hexaware Tech. reported a mixed Q4 CY25 with sequential revenue decline and margin compression due to seasonal factors, client-specific issues, and one-time adjustments. However, the full year CY25 showed robust revenue growth of 7.6% and significant margin expansion. The company highlighted a strong deal pipeline crossing $4 billion and expects growth acceleration post a seasonally weak Q1 CY26, driven by AI-led transformation and strategic vertical focus.

Highlights

  • Full year CY25 reported revenue growth of 7.6% and 7.1% in constant currency.

  • Normalized EBITDA margin for full year CY25 at 16.8%, an improvement of 120 bps YoY.

  • Pipeline crossed $4 billion for the first time, reflecting strong deal wins including a large consolidation deal in big tech and a major pet insurance company deal.

  • Cash balance of over $235 million and a completely debt-free balance sheet.

  • Attrition rate of 11% is among the lowest in the IT industry, indicating strong talent retention.

Concerns

  • Q4 CY25 revenue declined sequentially by 1.5% ($6 million), impacted by GSE cuts (70 bps annualized), significant client furloughs, and lower license revenues ($7 million drop QoQ).

  • Normalized EBITDA margin for Q4 CY25 dropped 210 bps sequentially to 15.4%, primarily due to Forex headwinds (20 bps), calendar impact (60 bps), utilization decline (60 bps), and merit increases (90 bps).

  • One-time impacts in Q4 included a $25 million earnout reversal for Softcrylic, $15 million impairment testing, and a $4 million credit loss provision, alongside $3.5 million for accelerated amortization of unused office space and $12.5 million for labor code impact.

Key financials

3 periods

Headline

  • Revenue
    389 Mn
    QoQ -1.5%
  • Normalized EBITDA Margin
    15.4%
    QoQ -2.1%
  • EPS
    ₹4.79
  • Adjusted EPS
    ₹6.15
  • DSO
    67 days
  • Attrition Rate
    11%

FY25

  • Revenue
    —
    YoY +7.6%
  • Normalized EBITDA Margin
    16.8%
    YoY +1.2%

FY25 CC

  • Revenue
    —
    YoY +7.1%

What they filed

Q1 FY27: revenue up 17.9%, net profit down 13.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,136 3,154 3,208 3,261 3,484 +11%3,478 +10%3,613 +13%3,845 +18%
EBITDA491 490 528 404 601 +22%378 −23%571 +8%605 +50%
Net profit300 321 327 380 370 +23%292 −9%352 +8%330 −13%
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

  • Financial Services
    — Growth
  • H&I
    — Growth (FY25)
  • M&C
    — Growth (Q4)— Growth (FY25)
  • HTPS
    — Performance
  • Banking
    — Growth
  • Travel and Transportation
    — Growth

Order book

high confidence

Pipeline

deal pipeline tcv

Pipeline value

Cancellations & deferrals

  • descoped: Substantial cut from one of the GSEs, impacting Q4 and Q1 CY26
  • deferred: Significant furlough from a client that normally does not do furlough
The company won pretty much all expected deals, with the pipeline crossing $4 billion for the first time, including a large consolidation deal in big tech and a major pet insurance company deal.

Source: Prepared remarks

Capital allocation

high confidence
  • Debt Debt disclosed
    The balance sheet is completely debt-free.
  • M&A Softcrylic Acquisition · Integrated

    Acquired in 2024, but missed earnout targets leading to reversals and impairment.

    Earnout related to the deal was reversed out ($25 million) and impairment testing resulted in a $15 million charge.

    The first one was, we acquired Softcrylic in 2024 and there was an earnout related to the deal which was payable based on the asset delivering agreed financial milestones. Softcrylic missed those targets, so the earnouts are reversed out. This was close to $25 million. Associated with that and for the other assets, we did impairment testing. It's an annual exercise which we do every year. Based on that, there was impairment testing done on client relationships and a charge of close to $15 million.
  • M&A CyberSolve Acquisition · Closed

    Contributed to volume growth in Q4, adjacent to cybersecurity services.

    Contributed to volume growth in Q4, but too early to assess full impact.

    a little bit of contribution from CyberSolve, which we closed in the middle of the quarter.
  • Liquidity Cash $235 Mn The company maintains a very healthy cash balance and is completely debt-free.
    Our closing cash balance is close to $235 million+. The balance sheet is completely debt-free.

Guidance & targets

Profitability

  • EBIT Outlook Profitability · CY26 · High confidence 13 to 14%
    Our EBIT outlook for the year is at 13 to 14%, which is lower than the current year.

    — R Srikrishna

Revenue

  • Revenue Growth Revenue · CY26 · High confidence better than 7.6%

    From 7.6% today

    What we're saying is that we expect our revenue growth to be better than what we reported in CY25, which is 7.6%.

    — R Srikrishna

  • Q1 CY26 Revenue Performance Revenue · Q1 CY26 · High confidence weaker
    And so we baked that all into the full year growth outlook and be saying Q1 will be weaker. It will always be seasonally weak, and it will be weak for us this year.

    — R Srikrishna

  • Growth Acceleration Revenue · CY26 · High confidence accelerate growth every quarter after Q1
    We will accelerate growth every quarter after Q1, and you will see that in our numbers.

    — R Srikrishna

Tax Rate

  • Effective Tax Rate (ETR) Tax Rate · CY26 · High confidence 25% to 26%
    We expect the ETR for CY26 to be between 25% to 26%.

    — Vikash Jain

Margin

  • Labor Code Impact on Margins Margin · full year next year · High confidence close to 20 bps
    On a continuing basis, we expect the impact to be close to 20 bps on margins for the full year next year.

    — Vikash Jain

What to watch in Q4 FY26

Revenue Growth Acceleration

next quarter (Q2 CY26 onwards)
Current Q4 CY25 sequential decline of 1.5%
Target Accelerated growth every quarter after Q1 CY26

Why it matters

Management's core thesis is growth acceleration post-Q1, crucial for meeting full-year guidance.

We will accelerate growth every quarter after Q1, and you will see that in our numbers.

Risks & concerns

  • GSE client budget cuts

    medium

    One of the GSE clients had a substantial cut (70 bps annualized impact) affecting Q4 CY25 and Q1 CY26.

    Management acknowledged

  • AI as a dampener on existing revenue

    medium

    AI could reduce the scope of existing work by 20-40% for the same output, impacting revenue growth.

    Management acknowledged

  • Labor code impact on margins

    medium

    The impact of the labor code is expected to be close to 20 bps on margins for the full year next year.

    Management acknowledged

  • Seasonally weak Q1 CY26

    medium

    Q1 is expected to be seasonally weak, with additional calendar headwinds and the ongoing GSE impact.

    Management acknowledged

  • Softcrylic acquisition underperformance

    medium

    Softcrylic (acquired in 2024) is not performing well, leading to earnout reversals ($25 million) and impairment charges ($15 million).

    Management acknowledged

  • Client furloughs

    low

    A client that typically does not furlough had significant furloughs in Q4 CY25.

    Management acknowledged

Q&A highlights

6 direct
CY26 growth trajectory and Q2/Q3 performance Direct
I said our growth will be better than 7.6%. I said our long-term thesis of low teens to mid-teens is intact. But you're right, no matter what number you pick, the growth ask in Q2 and Q3 will be high. Like I said, we do expect to accelerate growth every quarter from Q1.

Analyst pushed on the feasibility of achieving mid-teen growth given Q1 headwinds, and management reiterated confidence in acceleration post-Q1.

Asked by Prateek Maheshwari

Headwinds from Professional Services clients and GSE consolidation deal Partial
There were two clients in PS. One where we won the consolidation deal. We've been gaining market share. There was plateauing at the beginning of their fiscal year, which is July, and that will come back to growth. The other one where we had a very sharp decline, I'll say 75% decline from where we were a year ago, that stabilized. I think what you will see is that we will get growth again from Q2 in this vertical. On the other one, the GSE, our best read is that they still haven't decided on the consolidation deal.

Clarified the status of specific client issues impacting the Professional Services vertical and the ongoing uncertainty around the GSE consolidation deal.

Asked by Prateek Maheshwari

Hexaware's relative competitiveness in AI and growth trajectory Direct
If you recall, I think last quarter or even last quarter prior to that, I said that for CY25, our performance issues are not to do with Al. I'll say that my view in general for the industry, I do think there'll be an impact on growth for the industry and for us, and we've accounted for it in CY25. Now, I will reiterate why, I think... Actually, not only are we at par, I think we are way better. We've been first off on a number of fronts.

Analyst questioned the company's growth relative to peers and AI impact, prompting management to assert leadership in AI initiatives.

Asked by Ankur Rudra

AI's dampening effect on existing renewals and scope reduction Direct
Yeah, so I'll say if the scope were to remain the same, it could be in that 30 to 40%. I'll say 20 to 40% depending on the type of work. In some cases, at least, I think it comes with a higher volume. For the same scope, that's the auto-magnet of production.

Provided a quantitative estimate (20-40%) of how AI could reduce scope for existing work, while also noting potential for higher volumes.

Asked by Ankur Rudra

Impairment numbers discrepancy between BSE release and PPT Direct
There's no difference in terms of the numbers. It's the same number what I called out in terms of the impairment. In the notes, if you see there are two notes with respect to the impairment, you need to add both the amounts to the impairment to get to the same number what we have from a presentation perspective

Clarified a potential confusion regarding the reported impairment figures, directing analysts to specific notes for reconciliation.

Asked by Anmol Garg

Headcount increase despite utilization dip Direct
Preparing for deal ramp-ups.

Addressed the apparent contradiction of increasing headcount while utilization declined, indicating proactive hiring for future deal execution.

Asked by Anmol Garg

ACV trend for CY25 versus CY24 Direct
Where we ended in CY25 is better than where we ended in CY24, quite a bit so. In terms of bookings, we carry forward into the year. In addition, our pipeline is also materially better.

Provided a qualitative assessment of the ACV trend, indicating an improved booking position at the end of CY25 compared to CY24.

Asked by Dipesh Mehta

3 min read 6 chapters

Detailed narrative

AI Strategy and Market Positioning

Hexaware is deeply integrating AI into its operations, focusing on four key areas: building AI into platforms (Tensai, RapidX, Amaze), launching new AI-enabled services, retraining its workforce, and re-engineering processes like SDLC. The company claims to be first-to-market with products like RapidX for legacy reverse engineering and a vibe coding offering, and recently launched 'Zero License' for SaaS replacement. Management believes AI will positively impact every client daily, sooner than originally imagined, despite acknowledging a 20-40% scope reduction for existing work due to AI-driven productivity gains.

Q4 CY25 Financial Performance and Full Year Review

For Q4 CY25, Hexaware reported revenues of $389 million, a sequential decline of 1.5% ($6 million). This was primarily attributed to a 70 bps annualized cut from a GSE client, significant client furloughs, and a $7 million drop in license revenues to $11 million. Despite these headwinds, full year CY25 saw reported revenue growth of 7.6% (7.1% in constant currency) and proforma growth of 6.6%. The company's cash balance stood at over $235 million, and it maintained a debt-free balance sheet with DSO at 67 days, below the guided range of 70-72 days.

Margin Analysis and One-Time Items

Q4 CY25 reported EBITDA margin was 17%, normalizing to 15.4% after adjusting for one-time items, representing a 210 bps sequential drop. Key contributors to this decline included Forex headwinds (20 bps), calendar impact (60 bps), utilization decline (60 bps), and merit increases (90 bps). Full year CY25 normalized EBITDA margin improved by 120 bps YoY to 16.8%. One-time items in Q4 included a $25 million earnout reversal for the 2024 Softcrylic acquisition, a $15 million impairment charge, and a $4 million credit loss provision. Additionally, a $3.5 million accelerated amortization for unused office space and a $12.5 million labor code impact were noted at the EBIT level.

Deal Wins, Pipeline, and Client Mining

The company reported strong deal momentum, with its pipeline crossing $4 billion for the first time. Key wins included a large consolidation deal in big tech, a significant deal with a major pet insurance company, and a global CRO deal focused on clinical research process efficiency. Hexaware also expanded its large client base, now serving two clients with over $100 million in revenue (up from one last year) and adding one client in the $50 million+ category. The offshore mix improved by 440 bps YoY, with SMC contributing 100 bps to this improvement.

Workforce Dynamics and Utilization

Hexaware ended CY25 with nearly 34,000 employees and maintained an attrition rate of 11%, which is among the lowest in the IT industry. In Q4, the company added 254 resources, marking its 10th consecutive quarter of headcount addition. For the full year, 1,535 resources were added, with IT adding 2,000 and BPS seeing a reduction of 500. Utilization declined by 300 bps sequentially in Q4, attributed equally to furloughs, higher leaves during the year-end, and strategic bench building for upcoming deal ramp-ups. Management expects utilization to materially improve in the next quarter.

CY26 Outlook and Vertical Strategy

Hexaware expects CY26 revenue growth to be better than the 7.6% reported in CY25, with an EBIT outlook of 13-14% and an ETR of 25-26%. Q1 CY26 is anticipated to be seasonally weak, with calendar headwinds and ongoing GSE client impact. However, growth is expected to accelerate every quarter thereafter. From Q1 CY26, the company will report a new vertical, Technology, Products, and Platform (TPP), which is expected to grow faster from a small base. Banking and H&I are projected to lead growth, while GTT and FS will grow at company average, and M&C and Professional Services will trail.

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