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HCLTech Misses Q3 Revenue Estimate, Tightens Full-Year Forecast

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India’s third-largest software company, HCLTech, reported a smaller-than-expected revenue for the December quarter and revised its full-year growth forecast downwards. Despite an increase in demand anticipated for fiscal 2025, underperformance in its software business led to the company narrowing its revenue growth prediction.

Revenue and Forecast Adjustments

HCLTech’s consolidated revenue for Q3 rose by 5.1%, reaching 298.9 billion rupees ($3.45 billion), but this fell short of analysts’ expectations, which were pegged at 300.68 billion rupees. As a result, the company tightened its full-year revenue growth forecast for fiscal 2025 to 4.5%-5%, down from a previous range of 3.5%-5%. The revision reflects the completion of an acquisition of certain intellectual property (IP) assets from U.S.-based HP Enterprise last month.

Challenges in Software Business

The company’s software vertical, which constitutes 11% of total revenue, underperformed expectations. However, CEO C Vijayakumar noted an improvement in the demand environment, especially in discretionary spending, which is expected to pick up in 2025. He emphasized that clients are looking to increase their IT investments in the coming year, providing some optimism for future growth.

Profit and Deal Wins

Despite the revenue miss, HCLTech reported a 5.5% increase in net profit, which reached 45.91 billion rupees, slightly above analysts’ expectations of 45.82 billion rupees. The company also secured new deal wins worth $2.1 billion in Q3, a solid result despite a slight decline from the previous quarter ($2.22 billion) and a year-over-year increase from $1.93 billion.

Industry Outlook and Comparison

HCLTech is not alone in facing challenges in India’s tech industry, which has been experiencing slower growth due to inflationary pressures and macroeconomic uncertainty. Analysts expect U.S. President-elect Trump’s pro-business policies to benefit Indian IT firms, as the North American market accounts for a significant portion of the sector’s revenue.

Shares of market leader Tata Consultancy Services (TCS) surged 5.6% last Friday after signaling a possible demand revival, even though it missed Q3 estimates. HCLTech’s stock closed 0.3% lower ahead of its earnings report. Other major Indian IT companies, including Wipro and Infosys, are expected to release their quarterly results later this week.

 

American Eagle’s Profits Surge by 60% Despite Missing Sales Targets Amid Cost Reductions

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American Eagle Outfitters reported a significant 60% increase in profits for its second fiscal quarter, even though the company fell short of Wall Street’s sales expectations for the second consecutive quarter. Earnings per share reached $0.39, slightly exceeding the $0.38 predicted, while revenue came in at $1.29 billion, missing the $1.31 billion target set by analysts. This profit surge can be attributed to lower product costs, which helped the company achieve a gross margin of 38.6%, a 0.9% improvement over the previous year.

Net income for the quarter ending August 3 reached $77.3 million, up from $48.6 million in the same period last year, while sales increased by 8%, positively impacted by a calendar shift that added $55 million to the quarter’s revenue. The company’s intimates line, Aerie, saw a 9% growth in revenue, and the flagship American Eagle brand grew by 8%.

Despite strong performance in profitability, American Eagle’s shares dropped by more than 5% in premarket trading. The company has issued a better-than-expected outlook for the current quarter, anticipating comparable sales growth between 3% and 4%. However, its full-year forecast was more cautious, expecting total revenue to increase by 2% to 3%, which falls short of analysts’ expectations.

In response to slower demand for discretionary items, American Eagle has focused on cost-cutting and operational efficiencies to protect profits. The company has implemented a strategy aimed at boosting profits by 3% to 5% annually over the next three years and increasing its operating margin to 10%. For this quarter, American Eagle posted an operating income of $101 million, up 55%, with an operating margin of 7.8%.

Looking ahead, American Eagle remains cautious about the second half of the year due to uncertainties such as Federal Reserve interest rate decisions and potential economic disruptions from the upcoming presidential election.