India's third-largest IT services company by market capitalisation, HCL Technologies, is set to announce its financial results for the third quarter of the fiscal year 2024-25 on Friday, January 12. The market is anticipating a robust performance from the tech giant, even as the December quarter is traditionally a period of slower growth for the IT industry due to furloughs and holidays.
Market Sentiment and Dividend Announcement
Ahead of the earnings announcement, HCL Technologies' shares experienced minor pressure on the bourses. The stock traded with cuts, declining over 1% to ₹1,641.20 on the Bombay Stock Exchange (BSE). In a related development, the company had previously informed that its board will also consider declaring the fourth interim dividend for the financial year 2025-26 alongside the Q3 results.
Analysts Forecast Steady Performance
Brokerages and market experts predict that HCL Tech will deliver a steady set of numbers for the October-December period. The company is expected to outperform several of its industry peers in terms of revenue and net profit growth. This resilience is largely attributed to its diversified portfolio, which spans traditional IT services, high-growth engineering and R&D (ER&D) services, and its products and platforms business.
Analysts are projecting an approximately 11% year-on-year (YoY) growth in revenue when measured in Indian rupee terms. This growth is anticipated to be led by seasonal strength in the ER&D and software businesses. On the profitability front, net profit is seen growing in the range of 5% to 8% YoY.
Kotak Institutional Equities (KIE) noted that the ramp-up of significant deals secured during the quarter and the typical seasonality benefits in the products division would be key contributors to the top-line expansion.
Margin Improvement and Strategic Positioning
Operating margins are also expected to show improvement. Seema Srivastava, Senior Research Analyst at SMC Global Securities, highlighted that HCL Tech's diversification acts as a buffer against volatility in discretionary client spending. She added that EBIT margins may see moderate improvement, supported by strong demand for cloud, network, security, and digital workplace services.
"HCL Tech’s strong positioning in AI-led transformation and enterprise modernisation engagements is expected to remain a key strategic highlight during the quarter," Srivastava stated.
KIE forecasts the underlying EBIT margin to increase by 100 basis points sequentially to 18.5%, after accounting for a 70 bps impact from restructuring charges. Axis Securities is even more optimistic, predicting a quarter-on-quarter EBIT margin improvement of 187 bps, driven by favourable currency movements that would partially offset the impact of wage hikes.
Key Factors for Investors to Watch
Apart from the headline numbers, investors and analysts will focus on several key monitorables. KIE expects the company to narrow its full-year revenue growth guidance for FY2026 to 3.5-4.5% from the earlier band of 3-5%. The services revenue growth guidance may also be revised upwards to 4.5-5.0% from 4-5%, while the EBIT margin guidance of 17-18% is likely to be retained.
Seema Srivastava pointed out that key concerns include management commentary on the strength of the deal pipeline, execution momentum, and evolving trends in client decision-making, especially considering the seasonal furloughs observed in Q3. Performance across core verticals like financial services and technology, along with updates on operational discipline and talent management, will also be under scrutiny.
The company's ability to sustain growth in a challenging global macroeconomic environment will be a critical factor assessed by the market post the results announcement.
