HCLTech’s Q3 revenue rises 2.6% sequentially to $3.53 bn, bolstered by Americas

HCL Technologies Ltd on Monday reported a higher-than-expected revenue of $3.53 billion in the quarter ended 31 December, a 2.6% sequential rise, boosted by clients in the Americas who account for about two-thirds of the company’s sales.

Businesses in the Americas contributed about 81% of the Noida-based company’s sequential incremental revenue of $88 million.

Its net profit grew 7.5% sequentially to $544 million.

HCLTech outperformed analyst estimates on both fronts. A Bloomberg survey of 24 analysts expected HCLTech to report $3.5 billion in revenue and a similar survey of 22 analysts expected the company to report $537 million in net profit.

By contrast, TCS, which is the country’s largest software services company, reported a revenue decline of 1.7% in the December quarter to $7.54 billion. This was its worst third-quarter showing in nine years.

There was a stark difference between the two companies even in terms of headcount.

Unlike in the first half of the fiscal year, HCLTech snapped its headcount decline by adding 2,134 employees last quarter, taking its total headcount to 220,755 employees. TCS, on the other hand, reduced its workforce by 5,370 employees to 607,354.

Strong Q3, but software misses mark

To be sure, unlike peers, the third quarter is a strong one for HCLTech, India’s third-largest software services firm, primarily because a lot of licences in its software business come up for renewal during this period. The software products business makes up about 11% of its revenue.

HCLTech, which is celebrating 25 years of its going public, expects to end the year with 4.5-5% growth in constant currency terms, as compared with the 3.5-5% growth outlined in the preceding quarter.

Segment-wise, the company’s software products business contributed 66% of the company’s sequential incremental revenue of $88 million. HCLTech got $399 million in business from clients in this segment for the quarter ended December 2024.

Still, the company’s management was not pleased.

“One notable thing is our software performance this quarter was below our own expectations,” said C. Vijayakumar, chief executive of HCLTech, in a post-earnings press conference on Monday.

At least one analyst echoed a similar perspective.

“The company missed expectations on the software products front as there were lower software sales so that is disappointing,” said Abhishek Kumar, equity research analyst at JM Financial.

The information technology outsourcer has logged $10.3 billion in revenue for the April-December 2025 period, up 5.1% from the same period last year.

If HCLTech reports a 0.4% growth in the last quarter of this fiscal, as it did in FY24, its full-year growth would be slower at 4.7%. The company reported $13.3 billion in revenue in FY24, which is a 5.4% yearly growth.

Much like its larger peer TCS, the company is optimistic of a stronger growth this year, buoyed by a return of non-essential or discretionary IT spending by clients.

“Looking ahead in 2025, we believe clients are looking at increasing their IT investments,” said Vijayakumar.

“We do see an improvement in the demand environment, discretionary spending witnessing some uptick. They’re (clients) investing to drive innovation and efficiency, and in these initiatives, GenAI and data are at the centre,” said Vijayakumar.

Q4 outlook weighed down by planned cutbacks

However, there is a wrinkle to the growth. “While we are confident on the pace of medium-term recovery, bear in mind that Q4 outlook accounts for certain planned contractual reductions,” said Vijayakumar.

Another bright spot in its report card was the company’s operating margin, which grew 90 basis points sequentially to 19.5%. Much like the preceding quarter, the company’s software products business, making up 11% of its overall revenue, helped margin growth this quarter as well.

For HCLTech, its IT and business services segment remains its cash cow, bringing it about three-fourths or $2.58 billion of its quarterly revenue.

Even though policy uncertainty looms around the Americas as president-elect Donald Trump is set to be sworn in next week, there was no material fallout in terms of revenue from the region and outlook from the management.

HCLTech got $2.31 billion in revenue from the Americas, which is about 66% of the company’s overall revenue. This is 3.2% higher on a sequential basis.

Just like TCS, HCLTech did not disclose revenue from GenAI. It said that clients were eyeing real-time implementation of the technology at a faster clip now than in the past.