HCL Tech’s margins and constant currency growth to remain under pressure: Aditya Shah

The latest quarterly numbers of HCL Tech have sparked a measured response from market watchers, with a tone that leans more cautious than celebratory. While there are no major red flags, the overall performance appears to fall short of expectations in key areas such as growth and margins.

Speaking to ET Now, Aditya Shah, Founder, Hercules Advisors offered an assessment of the company’s performance and future outlook.

On the revenue front, the company reported a decline in constant currency revenue of 3.3% quarter-on-quarter, while managing a modest year-on-year growth of 2.4%. This mixed trend has raised some concerns among analysts tracking the sector.

“If you look at Q4 results, the constant currency revenue is down 3.3% quarter-on-quarter and up 2.4% year-on-year. A little bit disappointing on the constant currency side of it. The EBIT margins have come in at about 16.5%, that is also a tad bit disappointing. The TCV, the new deal wins stand at 1.9 million, that is fairly okay and the company has seen a net addition of employee count. So, net-net steady set of numbers, a little bit disappointing on the constant currency growth as well as the margin. The FY27 guidance of constant currency growth of 1% to 4%, I think they will be on the lower side of the band and the EBIT margin of about 17.5% to about 18.5%, I think there also they will be on the lower end… So, net-net steady set of numbers, a little bit disappointing, but nothing surprising us,” Shah said.

Margins, a key indicator of operational efficiency, also came in softer than anticipated at around 16.5%. While not alarming, this figure suggests limited near-term upside, especially in a competitive and cost-sensitive environment.

The company’s forward guidance for FY27, projecting constant currency growth between 1% and 4%, does little to inspire strong confidence. Analysts, including Shah, believe the actual performance may gravitate toward the lower end of this range. Similarly, margin expectations between 17.5% and 18.5% are also seen as optimistic given current pressures.

A notable highlight in the results was the announcement of $3 billion in new deal wins—a figure that, on the surface, appears robust. However, questions remain about the quality and sustainability of these deals.“So, that we need to understand from the management—what they are guiding for in the next coming one or two quarters, how the war affects the deal wins, and how the war affects the margins as well as the new deal wins. From my perspective, I am not sure that these results are really very good. They are a tad bit disappointing in my view,” Shah added.

The reference to geopolitical tensions underscores a broader uncertainty that continues to weigh on global business sentiment. Factors such as macroeconomic volatility and external conflicts could influence deal pipelines and profitability in the months ahead.

While the company’s performance remains stable, it lacks the momentum that investors typically look for. The numbers neither alarm nor excite—placing the results squarely in a “steady but subdued” category. The coming quarters, along with management commentary, will be crucial in determining whether this cautious outlook persists or begins to improve.