HCLTech growth outpaces TCS, Infy, but tempers FY26 outlook on macro challenges

HCL Technologies Ltd led India’s top four software services firms in growth for a second consecutive year, but signalled a cautious fiscal year 2026 (FY26) outlook, projecting a tempered 2-5% revenue increase amid macroeconomic challenges.

HCLTech, India’s third-largest information technology services company, reported $13.84 billion in revenue for the year ended March, up 4.3% year-on-year. Tata Consultancy Services Ltd (TCS), the country’s largest information technology (IT) firm, and second-largest Infosys Ltd reported a yearly revenue growth of 3.78% and 3.85%, respectively. In contrast, fourth-largest Wipro saw its full-year revenue decline 2.7% year-on-year.

Much like peers TCS, Infosys and Wipro, the Noida-based IT services provider is eyeing a stormy start to FY26 due to macroeconomic concerns, even as it guided for a 5% growth at best in constant currency terms, which does not take into account currency fluctuations. HCLTech guided for a tempered start to the new fiscal as it outlined revenue growth of between 2% and 5%, which is also its slowest projection on the lower end since March 2020.

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“We believe discretionary spending will continue to be subdued in this environment. Geopolitical factors like tariff and de-globalization are expected to impact IT services,” said C. Vijayakumar, chief executive of HCLTech, as part of his prepared remarks in the company’s post-earnings press conference on Tuesday.

“In the coming months, it will be an important topic to observe and monitor the ongoing development,” added Vijayakumar.

Much of this concern stems from macroeconomic uncertainty spurred by US president Donald Trump’s tariff flipflops.

With this, each of the country’s top four IT services companies has guided for a slow start to FY26. The company's performance and commentary echo those of its larger three peers that said that clients had slowed decision-making and paused projects owing to the hazy macroeconomic environment.

While TCS does not give guidance, Infosys projected a flat to 3% revenue growth for FY26 in constant currency terms, its weakest guidance since April 2009, when it had projected a revenue decline of 6.7-3.1% for FY10.

Smaller peer Wipro also expects to grow its revenue at its slowest pace in the April-June period of FY26. The company has already outlined a quarterly revenue decline between 3.5% and 1.5% in constant currency terms. Wipro gives guidance for the following quarter, whereas Infosys gives guidance for the full year. TCS does not give quarterly or yearly growth guidance.

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Much of HCLTech’s revenue growth came from telecom and media companies, which accounted for 92% of the company’s incremental revenue. Together, telecom, media, publishing and entertainment companies fetch 12.6% of the company’s overall revenue.

A bright spot in its report card was on its net profit front. HCLTech reported $2.04 billion in net income for the full year, a jump of 7.65% on a yearly basis. With this, the company outperformed analyst expectations on both revenue and net profit fronts.

In terms of operating margins, the company’s profitability expanded by 10 basis points to 18.3%. This was in line with Infosys and Wipro, both of which widened their margins by 40 basis points and 100 basis points, respectively.

A basis point is one-hundredth of a percentage point.

Much of this increase in profitability was on account of the company’s software products arm, the company’s most margin-accretive business unit. The software business’s profitability rose 200 basis points to 26.6% in FY25.

HCLTech is one of the few large IT outsourcers that has a sizable reliance on selling and licensing revenue of software products. The company’s revenue from its software business rose 3.3% to $1.43 billion but still, the bigger impact of this arm is on the company’s operating margins.

The company’s revenue in the fourth quarter (January-March 2025) fell 1% sequentially to $3.5 billion whereas net profit declined 8.8% to $496 million. Much of the decline in revenue was due to lesser business from manufacturers, its second-largest client bucket.

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Still, at least one analyst said this was in line with expectations.

“HCLT's Q4FY25 results are broadly in line with Street expectations with a 0.8% QoQ cc revenue decline, supported by lower seasonal drop in the products business which also supports inline EBIT (earnings before interest and taxes) margins at 18%,” said Manik Taneja, executive director at Axis Capital.

The company’s employee count fell by 4,061 to 223,420 people, making HCLTech the only company in the top four to reduce its headcount. Peers TCS, Infosys and Wipro added headcount in FY25.

HCLTech’s shrinking headcount, coupled with uncertain demand, signals a cautious hiring outlook, while the accelerating adoption of generative artificial intellgence raises fundamental questions about the future of the IT workforce in general.

For now, the management has refrained from calling out a hiring target, stating that hiring in FY26 would be more than FY25 and also that it would be conducted on a quarterly basis.