HCLTech Shares Tumble 11% Following Disappointing Quarterly Outlook
Shares of HCLTech experienced a sharp decline of nearly 11% on the Bombay Stock Exchange (BSE) on Wednesday. This significant drop came in response to the company issuing a softer-than-expected financial outlook, which followed a muted performance in the March quarter. The downturn reflects investor concerns over growth prospects amid challenging market conditions.
CEO Addresses AI-Driven Deflation and Growth Strategies
In light of worries about annual deflation of 2–3% driven by artificial intelligence (AI), CEO C Vijayakumar provided reassurances. He stated that HCLTech has managed to offset more than two-thirds of this deflation impact through the introduction of new services. This effort has helped mitigate the compression in deal sizes caused by ongoing automation in the traditional services business.
"We’ve already offset more than two-thirds of that deflation through new services," Vijayakumar emphasized. He pointed to the company's FY27 services revenue guidance, which is projected to be in the range of 1.5–4.5%, with a midpoint around 3%. For comparison, in FY26, HCLTech reported overall growth of 4.8%, with organic growth standing at 3.8%.
Quarterly and Annual Financial Performance Details
The March-quarter results showed a sequential decline of 3.3% in constant currency terms, although there was a year-on-year increase of 2.4%. In dollar terms, revenue amounted to $3.6 billion, marking a 2.9% drop sequentially but a 5.3% rise compared to the previous year.
For the full fiscal year FY26, HCLTech achieved constant currency growth of 3.9% and dollar growth of 6%, reaching total revenue of $14.6 billion. Vijayakumar attributed headwinds during this period to factors such as tariff volatility and weak discretionary spending by clients.
Investments in Advanced AI and Other Key Areas
HCLTech has been making substantial investments in what it terms "advanced AI" services. These efforts have culminated in an annualised revenue run rate of $620 million. Additionally, the company is focusing on expanding its capabilities in cloud computing, cybersecurity, and data modernisation to drive future growth.
While a portion of HCLTech's legacy business remains vulnerable to disruption from AI technologies, the broader strategy indicates a structural transition occurring across the IT services sector. Vijayakumar highlighted continued strength in financial services and technology verticals as key supports for near-term growth.
Operational Adjustments and Acquisition Clarifications
On the operational front, the company downplayed concerns regarding recent layoffs, including approximately 120 employees in Orlando. These job cuts were described as a routine adjustment linked to a specific client ramp-down. "We have over 20,000 employees in the US, and this was a planned change. It’s not indicative of broader trends," Vijayakumar clarified.
HCLTech also provided clarification on its current guidance, noting that it does not incorporate the potential acquisition of a telecom business unit from Hewlett Packard Enterprise. This exclusion is due to pending regulatory approvals, which are still underway.
Restructuring and Collaboration in the AI Landscape
As restructuring continues across the IT sector, Vijayakumar emphasized that HCLTech's approach remains targeted rather than structural. He mentioned that some acquisitions, particularly in the automotive segment, did not meet expectations and necessitated restructuring. "This is something we evaluate case by case each year; there’s no one-size-fits-all answer," he explained.
In the evolving AI landscape, where AI-native firms are seen as both competitors and collaborators, Vijayakumar underscored the critical role of IT services companies in enterprise adoption. "While we’re not quantifying investments or payback periods, deploying frontier AI models at scale in enterprises requires deep contextual understanding. That’s where service providers like us play a key role. We collaborate with AI companies to deliver value to clients," he stated.
