HCLTech Q1FY26: Profit Falls 10.7% QoQ, Guides 3–5%

Why Q1FY26 is expected to be soft for Indian IT

India’s top IT services companies - TCS, Infosys, HCLTech and Wipro - are heading into the June quarter with expectations of subdued earnings. Brokerages have pointed to AI-linked pricing pressure, weak discretionary spending, and global uncertainty as factors weighing on growth. The same notes suggest Infosys and HCLTech could narrow or trim the upper end of their earlier forecasts. Seasonality in certain product-linked businesses has also been flagged as a reason for flattish quarter-on-quarter performance across parts of the sector.

HCLTech’s reported Q1FY26 numbers in focus

HCLTech, India’s third-largest IT services firm, reported net profit of ₹3,843 crore for Q1FY26, down 9.72% year-on-year. On a sequential basis, profit fell 10.7%. For the quarter ended June 30, the company reported revenue of ₹30,349 crore, up 8.2% compared with the same period a year earlier. HCLTech also reported 3.7% constant-currency revenue growth for the April-June quarter, helped by performance in select verticals.

What drove growth and what stayed weak

The company said constant-currency revenue growth was supported by technology and services, telecommunications and media, and financial services. These gains more than offset sluggishness in manufacturing and the life-sciences vertical. In commentary included in the provided text, HCLTech also referred to softness in parts of the business due to lower discretionary spending and delayed decision-making. Brokerages tracking the quarter had similarly highlighted subdued client spending trends.

Deal bookings and demand signals

HCLTech reported new deal bookings of $1.81 billion for the quarter. Brokerages had been watching deal momentum closely as an indicator of whether demand is stabilising. In estimates cited, Nomura expected deal wins of $1 to $1.5 billion, while Prabhudas Lilladher expected $1.5 to $1 billion, driven by cost-optimisation-led demand. The actual booking figure provides a data point for how the quarter played out relative to those expectations, without changing the broader sector narrative of cautious spending.

Guidance changes: revenue raised, margin band cut

Following the quarter, HCLTech raised the lower end of its constant-currency revenue growth guidance for FY26. The company now expects to grow 3% to 5% on a constant-currency basis for the full year, up from 2% to 5% projected in April. But it cut its EBIT margin guidance to 17% to 18% from 18% to 19% earlier, citing restructuring as a key factor impacting margins. In the broader preview commentary in the provided text, analysts had largely expected the company to retain FY26 guidance, with revenue growth seen at 2% to 5% and EBIT margin at 18% to 19%.

Margins and investment pressure

The operating margin for the quarter was cited at 16.3%, lower than anticipated due to factors including decreased utilisation, a client bankruptcy, and ongoing investments in AI and market strategies. The same source noted that the HCL Software segment faced a 3% year-on-year revenue decline, although its annual recurring revenue saw a slight uptick. These details align with the wider theme of near-term margin pressure even as companies invest to remain competitive in AI-led service delivery and go-to-market activity.

What brokerages were modelling before the results

Ahead of the announcement, analysts expected a muted quarter, with many projecting minimal sequential revenue growth and flattish profit after tax due to seasonality and cautious spending. One preview estimate pegged profit after tax at ₹3,745 crore, up 6% year-on-year, with revenue projected at ₹27,997 crore, a 6.5% year-on-year increase. Estimates compiled from five brokerages indicated revenue growth of about 7.7% to 8.2% year-on-year but flattish quarter-on-quarter performance due to seasonality, especially in product-linked businesses.

Revenue estimates versus reported outcome

The following table summarises key Q1FY26 revenue estimates cited, alongside the reported revenue.

Sector backdrop: AI pricing pressure and cautious spending

The broader sector setup remains shaped by lower discretionary spends, longer decision cycles, and uncertainty in global markets. AI pricing pressure is also being discussed as a near-term headwind as customers push for more output per dollar and vendors invest in AI capabilities. In that context, the market focus remains on how firms balance growth, pricing, and margins while maintaining deal momentum. For HCLTech, the FY26 revenue guidance raise indicates confidence in execution and bookings, while the margin guidance cut highlights that profitability is being managed amid restructuring and investment requirements.

Market impact and what to watch next

For investors tracking the Indian IT pack, the key datapoints from the quarter include the profit decline, steady year-on-year revenue growth, and the guidance reset. The $1.81 billion deal figure offers a reference point for near-term demand, especially as brokerages were modelling higher ranges for wins. The updated FY26 bands set clearer markers for the rest of the year: 3% to 5% constant-currency revenue growth and 17% to 18% EBIT margin. Future quarters are likely to be assessed on whether manufacturing and retail improve, whether BFSI recovery sustains, and whether margin performance stabilises after restructuring actions.

Conclusion

HCLTech’s Q1FY26 results reflect a typical soft June quarter for IT services, with profit down and growth supported by select verticals amid cautious client spending. The company raised the lower end of its FY26 constant-currency revenue growth guidance to 3% to 5% but lowered its EBIT margin band to 17% to 18% due to restructuring. With AI-related pricing dynamics and global uncertainty still present, the next set of quarterly updates and deal booking trends are likely to remain central to how the market reads earnings season across large-cap Indian IT.