HCL Tech Q1 Preview: Revenue Anticipated to Decline QoQ, While Net Profit May Surge Due to Currency Depreciation.
With the earnings season gaining momentum, HCL Technologies is set to release its June quarter results, anticipated on July 13. Following a robust performance from Tata Consultancy Services, investor focus is keenly shifting to HCLTech, which is expected to deliver a mixed set of results. Projections indicate stable year-on-year growth but a sequential dip in revenue. Analysts note that margins are likely to remain resilient, buoyed by favorable currency movements and cost efficiencies, despite the variant pressures observed in revenue streams.
According to an aggregation of brokerage insights, HCLTech’s net profit is anticipated to witness an 18% year-on-year growth, with sequential increases in rupee terms primarily credited to currency depreciation. Notably, Morgan Stanley projects a 1.8% decline in revenue on a quarter-over-quarter basis in US dollar terms but anticipates an overall growth of 2% year-over-year. In contrast, research from BNP Paribas suggests a consistent decline in both services and software segments due to seasonal trends, with the overall revenue expected to decline 1.8% QoQ. Meanwhile, Kotak Institutional Equities maintains a cautious outlook, forecasting a 0.6% sequential decline in constant currency revenue but expecting the overall EBIT margin to show improvement due to favorable conditions.
The mixed projections extend further with Motilal Oswal and Nuvama expressing concerns about specific client headwinds affecting certain sectors such as Telecom and Manufacturing. While Motilal Oswal anticipates a 1.4% drop in revenue, it also projects an EBIT margin improvement supported by operational efficiencies. Conversely, Axis Direct predicts a revenue growth of 3.5% QoQ, albeit with expected headwinds stemming from client-specific issues. This divergence in expectations highlights the complexities in HCLTech’s operational landscape as it navigates seasonality and client challenges.
Looking ahead, investor attention will largely hinge on HCLTech’s strategic moves in AI-driven revenue growth and how it responds to pricing pressures throughout its core business. Speculation abounds concerning management commentary on the outlook for both services and software units, along with insights into client spending and potential new revenue streams. The guidance revision for FY27 remains a critical focal point, with several brokerages indicating the potential to lower upper revenue forecasts while retaining EBIT margin expectations. This impending earnings release promises to be a decisive moment for HCLTech as it confronts both opportunities and challenges in the evolving tech landscape.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)