HCL Technologies Ltd has reported a solid performance for the fourth quarter of FY25, maintaining its position as a leader in the technology services sector. The company has also outlined its growth projections for the financial year 2026, reinforcing its commitment to sustained growth and shareholder returns.

Revenue Growth Forecast for FY26
HCL Technologies has set a revenue growth target of 2-5% for FY26, expecting its services business to align with this range. The company also anticipates its EBIT margins to be in the range of 18-19%. This outlook shows a cautious yet optimistic approach to market conditions in the coming year. The company's leadership has emphasized their strategy to drive consistent growth across its core business sectors, including IT services, digital services, and software.

Q4 FY25 Performance
For the fourth quarter of FY25, HCL Technologies reported a net income of ₹4,307 crore, an 8.1% year-on-year increase despite a sequential decline of 6.2%. This demonstrates the resilience of the company’s business model, as it continues to manage fluctuations in the market and maintain a strong profit trajectory.

Revenue for the quarter came in at ₹30,246 crore, a 6.1% YoY increase, with a 1.2% QoQ rise. In constant currency terms, the revenue showed a slight decline of 0.8% QoQ, but a 2.9% YoY growth. USD revenue for the quarter was $3,498 million, down 1% QoQ but up 2% YoY, reflecting the global scale of HCL’s operations.

At the EBIT level, the company recorded ₹5,442 crore, marking 18% of revenue, with a YoY increase of 8.4% but a 6.5% QoQ decrease. This is indicative of the company’s operational efficiency and its focus on maintaining profitability, even as it faces challenges in certain areas of the business.

Strong Return on Invested Capital
One of the key highlights from HCL’s report is its impressive Return on Invested Capital (ROIC), which reached 37.9% on a last twelve months (LTM) basis, a remarkable 411 basis points increase YoY. The services business recorded an ROIC of 45.5%, showcasing the exceptional value being generated from the company’s investments in its core service offerings. These metrics highlight HCL’s ability to generate superior returns from its invested capital, which is an important indicator of financial health.

Operational and Financial Performance
The company delivered strong cash flow metrics, with $2,632 million in operating cash flow and $2,501 million in free cash flow on an LTM basis. The free cash flow to net income ratio stood at an impressive 123%, signaling robust cash generation capabilities. HCL’s financial discipline continues to underpin its ability to pay consistent dividends and reinvest in strategic growth initiatives.

The company also continued its tradition of rewarding shareholders, declaring a dividend of ₹18 per share. This marks the 89th consecutive quarter of dividend payouts, underlining HCL’s commitment to returning value to its investors. This consistent track record has made HCL Technologies a popular stock among income-seeking investors.

Growth in Digital and Software
Another key growth driver for HCL is its digital revenue, which accounted for 40.7% of its services revenue. This segment has been growing at a robust pace, with a 12.6% YoY increase in constant currency terms. HCLSoftware, a key division within the company, reported an annual recurring revenue (ARR) of $1.03 billion, reflecting a 1.8% YoY increase in constant currency. This is a testament to the company’s efforts to expand its software business and capitalize on the growing demand for digital transformation solutions.

HCL’s focus on new deal wins was also evident, with $2,995 million in total contract value (TCV) secured during the quarter. This demonstrates the company’s strong market position and ability to attract large-scale contracts from clients across various industries.

Workforce and Attrition
On the workforce front, HCL’s total employee count reached 223,420, with a net addition of 2,665 employees, including 1,805 freshers. The company’s commitment to hiring new talent, especially fresh graduates, reflects its focus on maintaining a dynamic workforce and ensuring that it has the talent pool required to drive future growth.

However, attrition rates have seen a slight uptick, reaching 13.0% on an LTM basis, up from 12.4% in the same quarter last year. While this is a slight increase, it remains relatively manageable compared to industry standards.

Conclusion
HCL Technologies is poised for another year of steady growth, with a 2-5% revenue growth target for FY26. The company has proven its resilience by achieving strong financial performance in FY25 and continues to deliver value through its digital and software offerings. With a disciplined approach to cash flow, robust dividend payouts, and strategic investments in its service portfolio, HCL Technologies remains well-positioned to tackle the challenges and opportunities in the tech services sector.

The company’s outlook, coupled with its consistent performance, makes it an attractive option for both long-term investors and those seeking dividends.

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