India’s third-largest software company, HCLTech, reported third-quarter results on Monday that fell short of analysts’ revenue expectations, as clients reduced their discretionary technology spending.
The company also narrowed its revenue growth forecast for the current fiscal year, reflecting the challenges facing the Indian tech industry amidst global economic uncertainty.
Revenue falls short despite profit increase
HCLTech’s consolidated revenue increased by 5.1% to 298.9 billion rupees ($3.45 billion) in the third quarter, missing the analysts’ average expectation of 300.68 billion rupees, as per LSEG data.
Despite the revenue shortfall, the company’s quarterly net profit rose 5.5% to 45.91 billion rupees, narrowly exceeding the analysts’ expectation of 45.82 billion rupees.
This mix of results highlights the uneven landscape the company faces, as it balances profit growth with revenue challenges.
Reduced revenue growth forecast
Reflecting the current market conditions, HCLTech narrowed its revenue growth forecast for the current fiscal year to 4.5%-5%, down from the previous estimate of 3.5%-5%.
This adjustment signals a more conservative outlook as the company navigates the impacts of reduced discretionary tech spending and ongoing global economic uncertainty.
New deal wins down, but still strong
The company secured new deal wins totaling $2.1 billion during the quarter, a slight decrease from $2.22 billion in the previous quarter, but an increase from $1.93 billion during the same period last year.
These new deal wins demonstrate HCLTech’s continued ability to secure new business, but the reduction from the previous quarter indicates that the company is not immune to the current economic challenges.
Tech industry slowdown and potential Trump policy benefits
India’s tech industry has been experiencing a growth slowdown over the past couple of years due to inflationary pressures and macroeconomic uncertainties.
However, some analysts believe that US President-elect Trump’s pro-business policies may benefit Indian IT firms, as the North American market accounts for over 40% of the sector’s overall revenue.
However, given the data released in this article, this may be a more complicated issue than it initially appears.
Seasonal weakness and market leader signals
India’s $254-billion IT services industry typically experiences a seasonal downturn in the December quarter as most clients reduce tech operations due to the holiday season in the United States and Europe.
Last Friday, shares of market leader Tata Consultancy Services jumped 5.6% after its CEO signaled a potential revival in demand, even though the company also missed third-quarter estimates, underscoring the complex and dynamic nature of the sector right now.
Both Wipro and Infosys are expected to report their numbers later this week.
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