HCL Tech Q2 results preview: revenue can increase up to 9.5% YoY; deal staging to drive growth and margins

India’s third-largest IT services company by market capitalization, HCL Technologies (HCLT), will announce its second-quarter earnings results on Monday, October 13, with the tech company expected to report net profit growth in a broad range of 0.8% to 6.1%. The bottom line is between Rs 4,136 crore and Rs 4,491 crore, showing moderate year-on-year growth but healthy sequential improvement.

Revenue in the quarter ended September is estimated between Rs 31,252 crore and Rs 31,603 crore, reflecting growth of 8%-9.5% YoY and 3-4% QoQ.

The estimates of five brokers, namely Nomura, Nuvama Institutional Equities, Axis Securities, HDFC Securities and Choice Broking, have been taken into account.

While the Japanese brokerage has the most conservative earnings after tax (PAT) estimates, HDFC Securities’ adjusted PAT is the highest in the pack. In terms of revenue, Axis numbers are the lowest, while Choice is the most bullish.

Brokers recommended four metrics to pay attention to:

1. PAT

– Nomura: Rs 4,136 crore, down 2.3% YoY, up 7.6% QoQ
– Nuvama: Rs 4,275 crore, up 1% YoY, up 11.3% QoQ
– Axis Securities: Rs 4,275 crore, up 0.9% YoY, up 11.2% QoQ
– HDFC securities: Rs 4,491 crore, up 6.1% YoY, down 16.1% QoQ
– Choice Broking: Rs 4,268 crore, up 0.8% YoY, up 11.1% QoQ

The sequential upturn is expected to be driven by ramping up of deals in the BFSI, Hi-Tech and ER&D verticals, although year-on-year growth remains limited by ongoing restructuring costs.

2. Income

– Nomura: Rs 31,511 crore, up 9.2% YoY, up 3.8% QoQ
– Nuvama: Rs 31,396 crore, up 8.8% YoY, up 3.5% QoQ
– Axis Securities: Rs 31,252 crore, up 8.3% YoY, up 3% QoQ
– HDFC securities: Rs 31,418 crore, up 8.9% YoY, up 3.5% QoQ
– Choice Broking: Rs 31,603 crore, up 9.5% YoY, up 4.1% QoQ

Revenue growth is expected to be supported by a stable services business, product and platform (P&P) improvements and net new deals in excess of $2-2.5 billion, including at least one major deal closure.

3. EBIT / EBIT margin

EBIT estimates are between Rs 5,343 crore and Rs 5,432 crore, with margins expected to grow modestly quarter-on-quarter despite year-on-year pressure:

– Nomura: EBITDA margin 16.5%, 210 year-over-year decline, 20 bps increase quarter-over-quarter
– Nuvama: EBIT margin 17%, down 160 basis points year-on-year, up 70 basis points quarter-on-quarter
– Axis Securities: EBIT margin 17.2%, up 87 bps YoY, down 142 bps QoQ
– HDFC Securities: EBIT margin 17.3%, down 129 bps YoY, up 101 bps QoQ
– Choice Broking: EBIT margin 17.1%, down 143 basis points year-on-year, up 86 basis points quarter-on-quarter

Analysts expect the modest sequential margin improvement to be supported by continued restructuring initiatives and better performance from the HCL Software unit, partially offset by higher sales investments.

4. Major monitorables

Street will be looking to FY26 guidance for revenue growth (3-5% YoY in CC terms) and EBIT margins (17-18%). Customer discretionary spending trends, especially in the BFSI, ER&D and digital segments, will remain critical.

Major deal wins and pipeline updates, along with the impact of macroeconomic headwinds on industries such as healthcare, manufacturing and retail, will be closely watched by the Street.

(Disclaimer: The recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)