HCLTech Q4 FY25: $620m AI run-rate as growth slows in FY26

What HCLTech reported and why it matters

HCL Technologies ended Q4 FY25 (quarter ending March 2025) with a mixed set of signals for investors. The company reported year-on-year expansion in profit and revenue, but saw a sequential decline in net profit and a contraction in operating margins. Management also pointed to a softer demand environment driven by lower discretionary spending and delayed decision-making in parts of the business.

At the same time, HCLTech continued to separate and scale its AI monetisation disclosures. Annualised “Advanced AI” revenue crossed $120 million, indicating growing traction for new, IP-led offerings even as traditional service lines face pricing and demand pressure.

Q4 FY25 financial snapshot: growth with sequential pressure

For Q4 FY25, HCLTech reported net profit of ₹43,070 million, up 8% year-on-year. Revenue from operations rose 6% year-on-year to ₹302,460 million. However, net profit fell 6.2% sequentially compared with the prior quarter, and the company flagged a contraction in operating margins.

Separately, HCLTech also described its annual performance as resilient in an “uncertain demand environment”, citing 3.9% constant-currency revenue growth and an operating margin of 17.2%, which it said was within its guided range but 10 basis points below its guidance on growth.

Full-year FY25: steady top line, stronger profit growth

On a full-year basis, HCLTech reported FY25 revenue of ₹1,170,000 million, up 6.5%. Net income for FY25 increased 10.8% to ₹173,900 million. The gap between revenue growth and profit growth highlights the role of execution and cost control through the year, even though the quarter-to-quarter pattern remains uneven.

The company also reported FY25 revenue of $13,840 million in another disclosure set, underscoring its scale across global delivery and client portfolios.

What management said: discretionary spend still soft

Management acknowledged that quarterly performance came in below internal expectations due to softness in certain parts of the business. The key reasons cited were lower discretionary spending and delayed decision-making among clients. These comments mirror the broader caution seen across the Indian IT services sector, where deal cycles can stretch even when multi-year transformation priorities remain intact.

The company also signalled that its near-term execution focus will remain tied to positioning for AI-led opportunities, stating that ensuring readiness for AI-driven value creation is a top priority for FY27.

Advanced AI: annualised revenue crosses $120 million

HCLTech highlighted that its new AI-led service offerings are getting traction, reflected in annualised Advanced AI revenue crossing $120 million in Q4. In another quarterly update, it said advanced AI revenue rose nearly 20% sequentially to about $148 million, driven by agentic AI, physical AI, and AI factory programmes.

Importantly, management differentiated “advanced AI” as distinct from AI embedded across traditional engagements, framing it as IP-led platforms and new offerings rather than automation benefits captured within standard delivery.

The company has also discussed a larger ambition to scale AI-led businesses. In separate commentary, it targeted $1,000 to $1,500 million of AI revenue within 2 to 3 years, while also stating that advanced AI revenue could scale to $1,500 to $1,000 million over time.

Software and ARR: a softer patch in HCLSoftware

Alongside AI traction, parts of the portfolio remain under pressure. HCLSoftware constant-currency revenue was reported down 4.1%. HCLSoftware ARR stood at $1,050 million, down 0.5% in constant currency.

These numbers point to a divergence within the business, where newer AI-led propositions show momentum while some software revenue streams and recurring revenue metrics see modest contraction.

Deals and bookings: pipeline strength remains visible

Despite the uncertain demand environment, deal wins were described as strong. HCLTech reported Q4 FY25 new bookings of around $1,000 million, with full-year TCV at $1,300 million.

One update also referenced a five-year strategic engagement worth $175 million. The company said this deal would involve modernising the client’s application and data landscape using its AI-led platform, indicating that AI is increasingly central to large transformation scopes.

Guidance and sector backdrop: cautious FY26, AI tailwinds

For FY26, HCLTech projected revenue growth of 2% to 5% in constant currency, with EBIT margin expected at 18% to 19%. That cautious forecast comes amid risks flagged for the sector, including global economic uncertainty and potential deflationary pressure on traditional services from AI.

In a later update, the company also said it raised full-year services growth guidance to 4.75% to 5.25% in constant currency while maintaining an EBIT margin band of 17% to 18%.

HCLTech has also referenced industry-level deflation expectations of about 2% to 3% in certain legacy services, while arguing that AI-driven growth segments could offset that impact.

Stock, valuation debate, and operational indicators

The broader market rally has provided some support to the technology sector, but the company’s stock performance has been contrasted with cautious forward guidance and recent sequential profit weakness. The narrative also flagged a higher P/E ratio versus competitors as part of the bear argument, alongside near-term concerns around margin pressure.

On workforce metrics, HCLTech reported an attrition rate of 13% on a last-twelve-month basis at the end of FY25. In a separate update, attrition improved to 12.4%, down sequentially and year-on-year.

The company’s longer-term share performance was also noted, with a 28.86% stock gain between January 1, 2022 and January 16, 2026.

Key numbers at a glance

What to watch next

HCLTech’s near-term debate centres on whether AI-led growth and a strong deal pipeline can translate into steadier sequential earnings and margin outcomes. The company has positioned advanced AI, AI factory programmes, physical AI, and outcome-based models as growth levers, while also acknowledging deflation risk in parts of traditional services.

Investors will track how FY26 guidance plays out against booking conversion, margin discipline, and the pace at which advanced AI scales beyond current run-rates. Future updates on the company’s AI revenue trajectory, software ARR trends, and execution consistency are likely to remain the key checkpoints.