HCLTech is gearing up to announce its Q2FY25 results on October 14, with revenue likely to see a sequential rise, though net profit may face pressure. Analysts expect profit to dip due to sluggish growth in the software business, the absence of revenue from the divested State Street BPO, and a potential normalisation of other income streams.
According to a Moneycontrol poll, HCLTech's Q2FY25 revenue is forecasted to grow by 1.6 percent quarter-on-quarter (QoQ) to Rs 28,517 crore, while profit after tax (PAT) is expected to decline by 5.5 percent QoQ to Rs 4,024 crore.
Earnings estimates of analysts polled by Moneycontrol are in a narrow range, so any positive or negative surprises may elicit a sharp reaction in the stock.
What factors are driving the earnings?
1) Revenue Growth: ac says Centrum Broking. Although the divestment of the State Street BPO business and a potential slowdown in the products segment may dampen the topline, deal wins might buffer this.
Back in April, HCLTech's UK subsidiary divested its entire 49 percent stake in a joint venture with State Street International Holdings for $172.5 million (approximately Rs 1,438 crore).
2) Margins: According to Moneycontrol's estimates, EBIT margins are set to expand by 70 basis points QoQ, due to favourable seasonal trends, improved business mix, and an absence of visa costs. "Margins are expected to expand by over 90 basis points QoQ due to the absence of productivity passbacks last quarter and operational efficiencies," said Phillip Capital.
3) Guidance: The majority of brokerages expect HCLTech to maintain its FY25 revenue growth guidance in constant currency at 3-5 percent. However, BNP Paribas predicts the company to raise the lower end of its FY25 revenue guidance from 3-5 percent to 4-5 percent in constant currency terms. Most analysts agree that the EBIT margin guidance will remain steady at 18-19 percent.
What to look out for in the quarterly show?
Investors will be keenly watching for updates on HCLTech's deal pipeline, hiring plans, and the company's outlook on both its services and software segments. Analysts will also watch for performance updates in key verticals like ER&D, telecom, and BFSI, as well as commentary on demand recovery in discretionary spending, client budgets, and AI-driven investments.
On October 11, HCLTech's shares closed 1.7 percent higher at Rs 1,840.
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