HCL Technologies Ltd. (HCLT.BO): Earnings Review: In line quarter with largely unchanged outlook; Neutral

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HCL Technologies Ltd. (HCLT.BO): Earnings Review: In line quarter with largely unchanged outlook; Neutral

Goldman Sachs HCL Technologies Ltd. (HCLT.BO)

TCS/Infosys. Overall revenue growth for the sector remains sluggish at low/mid-single

digit percentage, with limited signs of any meaningful acceleration in the foreseeable

future.

1QFY27 revenue growth subdued but deal wins strong: HCL’s revenue growth of

-0.5% qoq (constant Fx) was marginally below GSe at -0.2% but better than Visible

Alpha consensus expectation of -1.1%; services revenue growth was at -0.7% qoq, a

deceleration vs. -0.1% qoq in 4Q. 1Q is a seasonally weaker quarter for HCL due to

productivity commitments in few large managed services contracts; in addition, HCL saw

headwinds in ER&D, with the segment seeing a 3.7% sequential revenue decline in 1Q.

However, this was offset by strength in retail (recent deal win fully ramped up), and

continued strong traction in the Financial Services Vertical. Telecom (-8% qoq) was

negatively impacted by discretionary spend cuts in 2 large US telcos (called out in the

previous quarter). While HCL called out weakness in discretionary spending, its deal wins

in 1Q were strong and accelerated to 9% YoY growth (rolling 4 quarter), with the

company expecting strong bookings even in 2Q (HCL won a mega deal in July).

Guidance unchanged despite strong bookings: HCL maintained its FY27 organic

revenue growth guidance of 1% to 4%, or 1.5% to 4.5% for its services business. Per our

calculation, this translates into an ask rate of 0.5% to 2.5% CQGR for the remaining three

quarters of FY27 (services only), and implies a wide range of outcomes. HCL does not

expect its recent mega deal win to contribute meaningfully to FY27 revenues, and its