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.
