HCL Technologies Ltd will announce its financial results for Q3 FY25 today, after market hours. Investors will be watching the IT giant’s performance closely, especially after Tata Consultancy Services (TCS) released its Q3 FY25 results last week.
TCS reported decent revenue and better than expected deal gainsleading to a rally in IT sector stocks, with TCS shares surging over 5% the following day.
Market analysts predict that HCLTech will show robust growth in the December quarter, driven by its software business and the recent acquisition of Communications Technology Group (CTG).
HCLTech is expected to lead the Tier I IT companies in growth, with sequential constant currency (CC) growth of 4.6-5.5%. This growth is attributed to the seasonality of its software segment and the consolidation of CTG during one month. However, wage increases and leave are expected to affect margins somewhat.
Operating profit for the quarter is likely to range between $2-2.5 billion, and some analysts believe HCLTech may upgrade its revenue guidance for FY25.
Net profit: Prabhudas Lilladher estimates a 3.9% YoY rise in net profit to Rs 4,520 crore, compared to Rs 4,350 crore in the same quarter last year. JM Financial expects profit to rise 8.5% YoY to Rs 4,593.50 crore, while Nuvama forecasts a 13.1% YoY rise to Rs 4,790 crore.
Income: Analysts expect revenue to grow by 4.3-6% year-on-year, with estimates ranging from Rs 30,110 crore to Rs 30,393 crore.
Earnings before interest and taxes (EBIT) margin: The EBIT margin is expected to decrease slightly year-on-year but improve sequentially. Prabhudas Lilladher estimates a margin of 19.2%, while JM Financial forecasts 19.1%.
HCLTech’s growth in Q3 FY25 was supported by strong contributions from its IT services and software businesses.
Analysts at JM Financial have projected a $20 million contribution from the CTG consolidation and expect 1.5% quarter-on-quarter growth in the IT services, technology and R&D (ERS), and product and platform businesses.
Analysts said that while engineering and manufacturing segments may face softness due to challenges in the German auto sector, discretionary spending in the high-tech segment is expected to show signs of revival. This should provide long-term growth opportunities for the company.
Brokerages are optimistic that HCLTech will slightly upgrade its revenue growth guidance for FY25. Nuvama predicts that the company will raise its guidance to 4-5% CC YoY from the previous 3.5-5%. Margins are likely to expand 50 basis points (bps) sequentially, driven by a strong performance in the software business and operating leverage, despite headwinds from wage increases and layoffs.
HCLTech’s management is also expected to announce a dividend along with its quarterly earnings.
