Client Woes Drag HCLTech’s Q4 Show; Macro Uncertainty Clouds FY27 Guidance

HCLTech ended FY26 on a muted note as client-specific issues, delayed decision-making and weak discretionary spending weighed on its March quarter performance, while the company flagged an uncertain macro environment in its outlook for FY27.

India’s third-largest IT company by market capitalisation reported a 4.20% YoY rise in Q4FY26 consolidated profit to ₹4,488 crore, up from ₹4,307 crore last year. Its consolidated revenue from operations rose 12.35% YoY to ₹33,981 crore, but remained largely flat QoQ. In constant currency, revenue grew 2.4% YoY but declined 3.3% QoQ, while dollar revenue rose 5.3% YoY but fell 2.9% QoQ to $3.7 billion.

HCLTech has guided for 1–4% revenue growth in constant currency for FY27. In FY26, it reported 3.9% year-on-year revenue growth, missing its earlier guidance of 4.0–4.5% constant currency topline growth.

“The business environment remains highly fluid, making it difficult to form a definitive view of how the next 12 months will unfold,” C Vijayakumar, CEO & Managing Director, HCLTech, told reporters in a post-earnings press conference on Tuesday.

The Noida-based IT services giant reported a 3.3% sequential decline in Q4 revenue to $3.7 billion, with services growth coming in at the lower end of expectations. The weakness was accentuated by a sharp fall in its software business, which declined 28.1% quarter-on-quarter.

The CEO attributed the soft quarter to a combination of internal and external factors. “We saw a delay in procurement decisions in the month of March that resulted in revenue coming below our expectations,” Vijayakumar said.

He added that this was primarily driven by a reduction in discretionary spending in telecom, as well as the discontinuation of two SAP programmes, which happened late in the quarter. The company noted that some of this impact could spill over into the first quarter of FY27.

On the FY27 guidance, he explained that the lower end assumes continued weakness in discretionary spending and further deterioration in two key client accounts. “We do have two client-specific challenges in the Americas that will create a headwind of approximately 50 basis points to growth in FY27,” the CEO said.

At the same time, global macro risks are adding to the caution. The company flagged “rising energy prices and supply chain disruptions” in Europe, while noting that North America remains relatively resilient.

For the full year, HCLTech posted revenue of $14.7 billion, marking what it called the third consecutive year of “industry-leading growth” among large peers. HCLTech’s services revenue grew 4.8%, led by engineering and R&D, which rose 9.8%, while the software segment declined 4.1%.

Operating margins, however, remained under pressure. FY26 operating margin stood at 17.2%, down 40 basis points year-on-year (excluding restructuring announced earlier in the financial year).

Despite the moderation, the company underscored the growing role of artificial intelligence in its business. “The momentum around AI remains strong, with nearly every deal incorporating an AI or GenAI component,” the HCLTech CEO said, adding that advanced AI revenue reached $620 million annually.

Deal momentum moderates in Q4

After two strong quarters, the Noida-based firm’s deal wins slowed in the March quarter, with new bookings at $1.93 billion. However, full-year bookings remained stable at $9.3 billion, in line with the previous year.

The company also highlighted key AI wins, including a $100 million-plus AI factory deal with a global technology firm and engineering engagements with a semiconductor major.

Still, the near-term demand environment remains uneven. “Client behaviour reflected a continued focus on cost optimisation,” the CEO noted, pointing to ongoing pressure on discretionary spending.

While AI continues to be a structural growth driver, it is also reshaping traditional IT spending. The management acknowledged that deal sizes are being impacted. “Something that was a $100 million deal may now be an $80 million,” Vijayakumar said, as AI-led efficiencies reduce overall contract values.

The company also expects some cannibalisation of legacy revenues. “AI-driven depletion could be 2–3% a year,” it noted, even as new AI-led services are expected to grow 30–45% annually.

Currency gains to be reinvested

HCLTech indicated that benefits from a weaker rupee against the dollar would not directly boost margins. Instead, the company plans to reinvest the benefits of currency depreciation into strengthening its AI capabilities and sales engine.

The HCLTech board declared an interim dividend of ₹24 per share for the quarter. The record date is April 25, 2026, and the payment date is May 5, 2026. This brings the last 12 months’ payout to ₹60 per share, effectively distributing 97.6% of net income for the year.

In Q4, the company added 802 net new employees, taking total headcount to 227,181. For FY26, it added 3,761 employees. The company has not provided hiring guidance for FY27, though Chief People Officer Ramachandran Sundararajan said hiring is expected to continue at a pace similar to FY26. HCLTech recruited 11,744 freshers in the last financial year.