HCLTech Q4: Profit rises 10% QoQ, margins shrink as demand softness weighs

HCLTech reported a mixed performance for the March quarter (Q4 FY26), with profit rising sequentially but margins contracting sharply amid continued weakness in discretionary spending.

The company posted a consolidated net profit of ₹4,488 crore, up 10.11% quarter-on-quarter from ₹4,076 crore. Revenue, however, remained largely flat, inching up 0.3% to ₹33,981 crore compared to ₹33,872 crore in the December quarter.

Operationally, the performance was weaker. EBIT fell 10.6% QoQ to ₹5,620 crore, while EBIT margin declined to 16.54% from 18.56% in the previous quarter, reflecting pressure on profitability.

Demand softness drags performance

Management acknowledged that the quarter came in below expectations, pointing to a challenging demand environment.

Chief executive officer C Vijayakumar said, “Our performance came below our expectations due to softness in certain parts of our business due to lower discretionary spend and delayed decision making.”

The company noted that clients continued to remain cautious on spending, particularly in discretionary projects, which impacted sequential growth and margins.

AI bets gain traction

Despite near-term pressures, HCLTech highlighted strong traction in its artificial intelligence-led offerings, which are emerging as a key growth driver.

Chairperson Roshni Nadar Malhotra said, “As the global economy pivots to the AI era, we are evolving our all-weather portfolio and empowering our people so that we are nimble in adapting to fast-changing technology cycles and create value for our stakeholders.”

The company said its annualised AI revenue run-rate has crossed $620 million, underlining growing demand in this segment.

Margins under pressure

The decline in margins was attributed to a combination of factors, including lower operating leverage and business mix changes. Sequential weakness in certain segments, particularly software, also weighed on profitability.

Chief financial officer Shiv Walia said, “Our cash generation remains robust… and we continue to expand ROIC, with the company’s ROIC up 235 basis points year-on-year.”

HCLTech’s commentary suggests that demand visibility remains limited in the near term, with clients continuing to adopt a wait-and-watch approach.

While deal wins remain steady, the pace of conversion and ramp-up has slowed, reflecting broader macro uncertainty.

Shares of HCLTech ended 0.75% higher at ₹1,439 apiece on the NSE on Tuesday. The stock has declined nearly 3% over the past year, underperforming the benchmark Nifty 50 index, which has risen almost 2% during the same period.