The TechQuilt HCLTech’s Q1 Profit Dips 9.7% Amidst AI Investments & Growth Push
Indian IT giant HCLTech, founded by Shiv Nadar, announced its financial results for the first quarter of the fiscal year 2026, showing a 9.7% dip in net profit. The company’s profit for the quarter stood at ₹3,843 crore, a decrease from ₹4,257 crore reported in the same period last year.
Despite this decline in profit, HCLTech did see its revenue grow to ₹30,349 crore. This marks a small increase of 0.3% compared to the previous quarter and a stronger 8.2% rise when compared to the same quarter last year.
Why Did Profits Fall? Strategic Investments & Outlook
The company explained that its operating profits for the quarter were 16.3%, lower than expected. This happened for two main reasons:
- Lower Use of Resources: The company’s facilities and staff were not utilized as fully as planned.
- Increased Investments: HCLTech made significant new investments in cutting-edge technologies like Generative AI (Gen AI) and in efforts to expand its market reach (called “go-to-market” or GTM initiatives).
These investments, while impacting short-term profits, are aimed at strengthening the company for future growth, especially in the fast-evolving AI space.
Following these results, HCLTech has adjusted its financial outlook for the full year:
- Revenue Growth: They now expect total revenue to grow between 3% and 5% for the year (when ignoring currency changes).
- Profit Margins (EBIT): They also expect their operating profit margin (EBIT margin) to be in the range of 17% to 18%, a slight decrease from their earlier estimate of 18% to 19%.
CEO’s Take: Balancing Growth with Future-Ready Moves
V. Vijayakumar, CEO & Managing Director of HCLTech, shared insights into the results. He highlighted that while operating margins were affected by lower utilization and the new AI/GTM investments, the company still achieved a healthy revenue growth of 3.7% year-on-year. He pointed out that their “Services” business, which is a core part of their operations, performed particularly well, growing by 4.5% year-on-year.
He also shared positive news on new business:
- HCLTech secured total deal wins worth $1.8 billion in this first quarter.
- Their new AI offerings are proving very popular with clients, especially since their new partnership with OpenAI (the creators of ChatGPT).
- The overall demand for their services remains stable, and they have a growing pipeline of future projects.
To counter the impact on profits this year, HCLTech has launched a “margin restructuring program.” This initiative aims to bring their operating profit margins back to the 18-19% range in the future. Steps in this program include:
- Optimizing facilities that are not being fully used.
- Hiring new talent only when absolutely necessary, based on specific project needs.
In essence, HCLTech is navigating a period of strategic investment and adjustment. While profits have seen a temporary dip, the company is actively investing in future technologies like AI and streamlining operations to ensure long-term growth and efficiency in the competitive IT services market.
