Speaking to ET Now, C Vijayakumar, CEO and MD of HCL Technologies, said the company delivered “exceptional” total contract value (TCV) bookings of $3 billion in the December quarter, including one mega deal and multiple large contracts.
AI-led discretionary spend replaces traditional tech demand
Vijayakumar noted that discretionary technology spending has shifted away from traditional areas towards AI-enabling and AI-adjacent services, which HCL Tech has been actively targeting.
“We are seeing strong traction in advanced AI areas that are closely linked to the broader capex cycle in the global technology industry,” he said, adding that this trend supported both Q2 and Q3 growth.
The company disclosed advanced AI revenue of $146 million for the quarter, marking a 20% sequential growth, and translating into a $600 million annualised run rate. Management clarified that advanced AI revenues include specialised services such as AI data centre build-outs, custom silicon for edge inferencing, robotics, and physical AI, rather than embedded AI used across routine service delivery.
Margins steady despite wage hikes and rupee volatility
HCL Tech reported an EBIT margin of 18.6% for the quarter, while reiterating its full-year margin guidance of 17–18%.
According to Shiv Walia, CFO of HCL Technologies, the quarter benefited from seasonally strong performance in the software business, which posted nearly 35% EBIT margins, despite being only about 10% of overall revenue.Walia said rupee depreciation added around 40 basis points to margins, while wage hikes impacted margins by nearly 80 basis points. In addition, the company absorbed a one-time charge of $109 million related to the implementation of new labour codes.
“The labour code impact is a one-time cost. Going forward, the annual margin impact should be limited to about 10–20 basis points,” Walia said.
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 and enter the next financial year with a “clean slate”.
Pricing discipline amid cost takeout deal pressure
Addressing concerns over aggressive pricing in cost takeout deals, Vijayakumar said HCL Tech remains selective.
“There may be pockets of aggressive pricing, but seasoned technology buyers understand the need for long-term, value-based partnerships,” he said, adding that the company is prepared to walk away from deals that do not meet profitability thresholds.
Management expects margins to move back towards the 18–19% range in FY27, once one-time restructuring and labour-related costs subside.
Vertical and geographic outlook
HCL Tech said 97–98% of its business is international, making overseas demand the key driver of overall growth. The US continues to show strong momentum, while Europe remains relatively soft. The “rest of the world” portfolio and India operations posted healthy year-on-year growth.
By vertical, technology services grew 14% year-on-year, driven by demand for custom silicon and AI inferencing solutions across retail, industrial, and manufacturing sectors. BFSI grew 8% year-on-year, remaining one of the company’s fastest-growing verticals despite seasonal softness in the December quarter. ER&D services also posted over 3% sequential growth and double-digit annual growth.
Of the $3 billion in quarterly bookings, about 63% came from digital applications and engineering & R&D services, with strong traction across retail, CPG, financial services, telecom, and manufacturing.
Workforce strategy and AI productivity
Employee headcount rose by over 6,000 year-on-year, though remained flat sequentially. Vijayakumar said 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.
On concerns around AI-driven revenue deflation, management said the strategy focuses on expanding addressable markets and building entirely new revenue streams, supported by large global capex investments in software and hardware infrastructure.
“We are confident that AI-led efficiency gains will be offset by broader market expansion and new services,” Vijayakumar said.