HCL Technologies has reported a robust demand environment, driven by strong AI-led discretionary spending and large deal wins. The company’s CEO, C Vijayakumar, stated that the company delivered “exceptional” total contract value (TCV) bookings of $3 billion in the December quarter, including one mega deal and multiple large contracts. This growth is attributed to the shift in discretionary technology spending towards AI-enabling and AI-adjacent services.
The company’s pipeline remains healthy, with margins stabilizing and AI-linked services emerging as a key growth driver for the coming quarters. HCL Tech’s advanced AI revenue grew 20% sequentially to $146 million, with an annualized run rate of $600 million. The company’s EBIT margin was 18.6% for the quarter, with the full-year margin guidance remaining at 17-18%.
Despite wage hikes and rupee volatility, the company’s margins were steady, with the software business posting nearly 35% EBIT margins. The company also absorbed a one-time charge of $109 million related to the implementation of new labor codes. Restructuring costs for FY26 are expected to be around 50 basis points for the full year, with management aiming to complete the exercise by Q4.
HCL Tech remains selective in its pricing discipline, with management stating that they are prepared to walk away from deals that do not meet profitability thresholds. The company expects margins to move back towards the 18-19% range in FY27, once one-time restructuring and labor-related costs subside.
In terms of verticals, technology services grew 14% year-on-year, driven by demand for custom silicon and AI inferencing solutions. BFSI grew 8% year-on-year, despite seasonal softness in the December quarter. The company’s international business drives overall growth, with the US showing strong momentum and Europe remaining relatively soft.
The company’s workforce strategy is focused on AI-led productivity, with employee headcount rising by over 6,000 year-on-year. However, future hiring will closely track revenue growth, with AI-led productivity allowing the company to deliver 4-5% growth without proportional increases in workforce size. Management is confident that AI-led efficiency gains will be offset by broader market expansion and new services.
Overall, HCL Technologies is well-positioned for growth, with a strong pipeline, stabilizing margins, and a focus on AI-led services. The company’s ability to deliver exceptional TCV bookings and its selective approach to pricing discipline position it for long-term success in the technology industry.