Discretionary spending is emerging in new pockets; HCLTech CEO sees ‘little value’ in waiting for anticipated demand

HCLTech CEO and MD C Vijayakumar

HCLTech CEO C Vijayakumar said the IT services giant is looking to capture ‘emerging’ new pockets of discretionary spending as traditional tech spending continues to remain slow in global markets.

Speaking at the company’s earnings conference for the October-December quarter on January 12, Vijayakumar noted that the uncertainties and slow spending growth persists in the global markets, though fundamental demand for technology as a driver for business transformation remains unaffected.

Even as discretionary spending in expected traditional areas remain elusive, the company is proactively identifying the “emerging new pockets” of discretionary spending that will drive demand.

“I believe there is little value in waiting for either historical or anticipated discretionary spending to resume. Instead, the focus should be on opportunity, identifying proactively where the spending is occurring and targeting those opportunities,” said Vijayakumar.

He added, “Capturing such spending in this environment demands a high degree of creativity and innovation, and should be aligned with where the money is moving today, rather than where it used to be. We at HCL tech are always working towards addressing such evolving trends, and I'm confident we will deliver this well, this cycle.”

Growth guidance update

Despite the seasonality of Q3 in the IT sector due to holidays in the US and furloughs, HCLTech reported steady performance and a strong net new deal pipeline.

The company has updated its revenue growth guidance for the full year FY26. HCLTech revised its full-year revenue growth guidance to be between 4-4.5 percent YoY in constant currency (CC) terms; which was previously estimated to be 3-5 per cent YoY CC growth.

Services revenue growth is now expected to be between 4.75 percent and 5.25 percent YoY in CC.

EBIT margin or operating margin projection remains steady, between 17 per cent - 18 per cent, excluding the one-time impact from the new labour laws.

“On the back of a standout quarter and sustained growth momentum and strong bookings, we are raising our full year services guidance to 4.75 to 5.25% in constant currency, and the overall company level guidance to 4 to 4.5% in constant currency. We remain on track to deliver a full year Ebit margin guidance of 17 to 18%,” Vijayakumar said.

He added that overall full year budgeting by clients have become more agile in the last 3-4 years, making it too early to gauge their tech spending plans for calendar year 2026.

“Clients keep modifying budgets every quarter or every three months. I don't think we're going to get a very precise perspective on client budgets at this point,” he said.

Deal wins remain strong

“Our pipeline continues to demonstrate strength and sustain growth. It is strategically diversified across business segments, verticals and geographic regions with AI, Gen AI, physical AI and Agentic technologies now integral to virtually every transaction,” Vijayakumar said.

HCLTech clocked in $3 billion worth of net new deal wins in the quarter-ended December, up from $2.5 billion in Q2.