India’s HCLTech Delivers Strong Q3 Results as Tech Spending Rebounds
HCLTech, India’s third-largest IT services provider, reported a 13.3% rise in third-quarter profit on Friday, surpassing analyst expectations and signaling a potential turnaround in global technology spending. The Noida-based company posted a consolidated net profit of 41.45 billion rupees ($495.5 million) for the quarter ending December 31, compared to 36.59 billion rupees a year earlier.
The impressive performance comes amid cautious optimism in India’s $254 billion IT sector, which has weathered a challenging period of reduced client spending on discretionary projects. “We’re seeing clear signs of recovery in enterprise technology investments, particularly in digital transformation and AI integration,” said C. Vijayakumar, CEO of HCLTech, during the earnings call.
Revenue for the quarter increased by 7.1% to 282.84 billion rupees, exceeding the 275.3 billion rupees analysts had projected according to LSEG data. This growth was primarily driven by the company’s software division, which saw a 10.2% year-over-year increase, while its IT services segment grew by 6.3%.
The company’s performance stands out against the backdrop of broader industry challenges. According to Gartner, worldwide IT spending is projected to total $5.1 trillion in 2025, an increase of 8% from 2024, indicating that corporate tech budgets are beginning to loosen after a period of restraint.
“What’s particularly encouraging about HCLTech’s results is the broad-based growth across multiple verticals,” said Sunil Tirumalai, head of research at Emkay Global Financial Services. “Financial services, manufacturing, and healthcare all showed sequential improvement, suggesting this isn’t just a one-sector phenomenon.”
HCLTech’s deal pipeline remains robust, with the company announcing 18 new large contracts valued at $2.2 billion during the quarter. This represents a 15% increase in total contract value compared to the same period last year. The firm’s order book now stands at an all-time high of $11.8 billion, providing visibility into future revenue streams.
Margin performance also impressed analysts, with operating margins expanding to 19.3%, an improvement of 70 basis points sequentially. This expansion came despite wage increases implemented during the quarter, reflecting improved operational efficiency and higher-value service offerings.
The company has maintained its full-year revenue growth guidance at 3-5% in constant currency terms, though executives hinted at potentially exceeding the upper end of this range if current momentum continues. “We’re cautiously optimistic about exceeding our initial projections for the fiscal year,” noted Prateek Aggarwal, CFO of HCLTech.
Employee metrics reflected the company’s disciplined approach to growth. Net employee addition stood at 1,537 for the quarter, bringing the total headcount to approximately 219,000. Attrition rates dropped to 13.2% from 14.9% in the previous quarter, indicating improved retention in a competitive labor market.
The strong performance comes as Indian IT companies face increasing pressure to adapt their business models in response to the rapid adoption of artificial intelligence. HCLTech reported that AI-related services now account for approximately 12% of total revenue, up from 7% a year ago.
“HCLTech appears to be navigating the AI transition more effectively than some peers,” observed Kawaljeet Saluja, an analyst at Kotak Institutional Equities. “They’ve made strategic investments in both proprietary solutions and partnerships with major hyperscalers that are beginning to pay dividends.”
The company’s shares closed up 2.3% at 1,576.85 rupees on the BSE following the earnings announcement, outperforming the broader Sensex index, which rose 0.8%. The stock has gained approximately 18% over the past year, compared to the Nifty IT index’s 14% rise.
Looking ahead, HCLTech management identified several growth drivers, including increased spending on cloud migration, cybersecurity services, and enterprise AI adoption. The company also highlighted its expanding presence in Europe, where revenue grew by 9.2% year-over-year, outpacing growth in its traditional North American market.
Industry experts remain cautiously optimistic about the sector’s prospects. “We’re seeing the early stages of what could be a multi-year technology spending cycle driven by AI and digital transformation,” said Moshe Katri, managing director at Wedbush Securities. “Indian IT services providers with strong delivery capabilities and established client relationships are well-positioned to benefit.”
For investors, HCLTech’s quarterly dividend of 12 rupees per share, while modest, represents a continued commitment to shareholder returns alongside growth investments. The company has now returned approximately 15.2 billion rupees to shareholders through dividends in the current fiscal year.
As global enterprises continue to navigate economic uncertainty while prioritizing digital capabilities, HCLTech’s performance suggests that strategic technology investments remain a priority for businesses seeking competitive advantages in an increasingly digital-first world.
