HCL Tech Q2 profit, revenue growth beat street

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26 Aug, 2025 12:21

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HCL Technologies reported a net profit of Rs 1,496 crore (up 5.7 percent quarter-on-quarter) on revenues of Rs 8,184 crore (up 2.8 percent) for the second quarter.

This was higher than analysts’ consensus estimates, which stood at net profit of Rs 1,453 crore on revenues of Rs 8,126 crore.

Earnings from IT companies were expected to be strong this quarter, thanks to the rupee depreciation, even as the December quarter is considered seasonally weak.

But HCL delivered strong growth even in dollar revenue, which rose 4 percent sequentially to USD 1,321 million, against the street’s expectations of 3.3 percent. This topped Infosys’ dollar revenue growth that came in last week at 1.6 percent for the quarter.

Also read: HCL Tech hits record high, up 3% on strong Q2 earnings

“HCL continues its profitable growth trajectory with yet another stellar quarter of 4% quarter-on-quarter revenues growth and 39.1% year-on-year net income growth,” said President and CEO Anant Gupta.

Margins higher despite wage hike

The company delivered strongly on the margin front as well, with net and operating margins coming in at 18.3 percent and 23.7 percent, respectively. For the September quarter, margins for the firm stood at 17.8 percent and 23.7 percent.

“Margins did not decline despite HCL’s customary wage hike that takes place in this quarter of the year,” said Rajiv Mehta, Analyst at IIFL. “This was due to operational efficiencies that came in.”

CFO Anil Chanana said the operating efficiencies, the scale of business in the run-the-business offering and the optimization of general and administrative spend helped in pushing the net income margin.

“The asset light model reflected by our fixed asset turnover at 10 times of revenues, and efficient working capital management, continued to keep the return on equity at a historic high of 35 percent and operating cash flows in excess of 100 percent of net income."

Revenue break-up and deal wins

HCL reported a 7.8 percent revenue growth from European clients. As a result, the geography-wise revenue mix now stands at 56.9 percent/31.3 percent/11.8 percent (US/Europe/other regions), compared to 56.9 percent/28.5 percent/14.6 percent in the year-ago quarter.

In the service-wise mix, HCL now derives greater revenue, 33.7 percent, from infrastructure services than from the year-ago quarter of 28.4 percent. This could be a cause for concern, according to Bhavin Shah, CEO of Equirus Securities.

“If you look at the balance sheet, half of the revenues on incremental basis are going into account receivables. And the unbilled revenues are also half of the revenues. So, there is a slight deterioration there,” Shah said.

The company now has six USD 100 million plus clients, up from five year-on-year, while total clients increased to 427 from 418. New clients contributed 3.4 percent to the quarter’s revenues.

Stock view

Ahead of the earnings, the stock had rallied about 15 percent in the past month. In early Thursday trade, the stock hit a record high.

But according to IIFL’s Mehta, the stock will likely be upgraded. “We will see earnings upgrades for HCL Technologies driven by both the margin surprise as well as by better-than-expected-revenue growth.”

But Shah of Equirus said he would be cautious on the stock. “The EPS expectations could go up slightly. But the stock has rallied strongly and I have some concerns around the balance sheet,” he said. “Unless there is some real change here, my view is not going to change.”