Talking to ET Now, HCL Technologies CEO and MD C Vijayakumar admitted that the fourth quarter fell short of internal expectations, pointing to two main pressure points: a sharp slowdown in the software business and weakness in select service segments.
“The software business in March was much weaker and some procurement decisions got delayed,” Vijayakumar said, estimating that this alone shaved off nearly $30 million from expected revenues. On the services side, a pullback in discretionary spending by a couple of telecom clients further dented performance, even as the company managed to meet its full-year services guidance of 4.8% year-on-year growth.
Despite the quarterly stumble, HCL Tech closed FY26 with overall revenue growth of 3.9% year-on-year, which Vijayakumar noted places the company among the highest-growing large-scale IT players for the year.
Cautious guidance for FY27
For FY27, HCL Tech has issued revenue growth guidance of 1% to 4% overall, with services — which make up 92% of total revenue — guided to grow between 1.5% and 4.5%. The lower end of the range accounts for continued softness in discretionary spending, while the upper end assumes a moderate recovery.
The company has also announced two acquisitions — Jaspersoft and an HPE unit — that are currently awaiting regulatory approval. On a full-year basis, these could add approximately 1.5% to revenue growth, though the exact contribution will depend on the timing of deal closures.
Margin pressure and the wage factor
EBIT margins fell by around 200 basis points during the quarter, a notable decline even accounting for currency tailwinds. CFO Shiv Walia broke down the impact: wage hikes accounted for roughly 45 basis points of pressure, restructuring costs added another 41 basis points, and a bad debt charge weighed in at around 20 basis points. Currency movement provided partial relief of about 65 basis points.For FY27, HCL Tech has guided for EBIT margins in the range of 17.5% to 18.5%, with Walia expressing confidence that internal efficiency programs and lower restructuring costs will support this target.
AI: Opportunity and deflation risk
One of the more candid aspects of management commentary was on the dual nature of AI for the company. HCL Tech acknowledged that AI-driven productivity is creating a 2% to 3% deflationary headwind on traditional services such as application development, support, and infrastructure management.
To counter this, the company is aggressively building what it calls “advanced AI” revenue streams — spanning AI factories, physical AI, proprietary platforms, inferencing capabilities, and custom chip design services. These new services are already generating an annualised revenue run rate of $620 million, and management expects this segment to grow at 25% to 30% annually over the next few years.
Total AI revenue for the quarter stood at $155 million, up approximately 6% quarter-on-quarter on a constant currency basis.
Geography and vertical trends
North America remains the more resilient geography for HCL Tech, with broad-based strength across verticals and clients. Europe, by contrast, is showing signs of softness. Within verticals, financial services and technology and services — together accounting for over one-third of revenues — continue to see healthy discretionary spending. Other verticals, particularly manufacturing and retail, have been more cautious.
The automotive segment, which took a significant hit in FY26 following the acquisition of ASAP, is believed to have bottomed out, with management expecting a gradual recovery.
The bigger picture
Vijayakumar pushed back on the broader narrative that AI poses an existential threat to Indian IT services. He argued that deploying new technology at enterprise scale — navigating legacy infrastructure, compliance requirements, and operational complexity — is precisely where service providers like HCL Tech create lasting value. That role, he suggested, will only grow more important as AI adoption accelerates across industries.