HCL Technologies smashes expectations with incredible Q2 FY25 results – find out what’s driving the success

In a display of resilient growth, HCL Technologies Limited has reported a sequential revenue growth of 2.9% in INR terms and a year-over-year growth of 8.2% for the second quarter of fiscal year 2025. Constant currency revenue for the period also experienced positive momentum, rising by 6.2% YoY. With its EBIT margins standing at 18.6%, up 149 basis points from the previous quarter, HCL Technologies is showcasing robust financials amidst a competitive technology landscape.

HCL Technologies’ overall revenue reached ₹28,862 crore, or $3,445 million in USD terms, which reflects a sequential quarterly increase of 2.4%. The digital revenue segment continues to be a key driver, growing by 7.8% YoY and now contributing 38.5% of overall services revenue. Notably, the HCLSoftware unit’s revenue rose 9.4% in constant currency terms year-over-year, with annual recurring revenue (ARR) growing to $1.05 billion.

HCL Technologies Delivers Improved Profitability Metrics

The EBIT margin of HCL Technologies saw a noteworthy jump of 149 basis points from the prior quarter, reaching 18.6%. Chief Financial Officer Shiv Walia noted that the firm’s “efforts to improve cash conversion have delivered impressive results, with Free Cash Flow (FCF) to Net Income (NI) coming in at 119%.” This was achieved despite the economic uncertainties facing the broader IT services sector. The improvement in cash flow metrics and profitability underscores the company’s effective operational management, which has helped it navigate various challenges such as fluctuating client demands and increased competition from other IT service providers.

The company has also been focused on cost optimization, reducing SG&A expenses by over 1% as a percentage of revenue compared to the previous quarter, contributing positively to the overall EBIT improvement. The rigorous focus on cost controls, combined with strategic investments in growth areas such as artificial intelligence and cloud services, positions HCLTech well for the upcoming quarters.

Return Metrics and Dividend Updates: The return on invested capital (ROIC) also showed significant improvement, coming in at 35.7%, up 353 basis points year-over-year. This improvement reflects the company’s strategic allocation of resources into high-return areas, such as AI and automation technologies, as well as new client acquisition initiatives. The company declared a dividend of ₹12 per share, marking the 87th consecutive quarter of dividend payouts, which is a testament to its consistent profitability and commitment to returning value to shareholders.

Expert View: HCLTech Leverages AI to Drive Growth

C Vijayakumar, CEO and Managing Director of HCL Technologies, emphasized the strength of the company’s digital and AI-led offerings. He stated that HCLTech’s artificial intelligence initiatives, including GenAI offerings like AI Force and AI Foundry, are resonating well with clients and are poised to drive future growth and operational efficiency. Vijayakumar expressed confidence in the pipeline of projects related to Data & AI, Digital Engineering, and SAP migration, calling them “medium-term drivers of efficiency, growth, and innovation.”

HCLTech has also continued to invest heavily in AI technologies, evidenced by the increasing share of AI-driven contracts among its major wins this quarter. These deals include collaborations with several Fortune 200 companies, leveraging HCL’s GenAI capabilities for improving automation and business outcomes. Notably, the company’s AI Force platform has become a popular choice for clients seeking to optimize their operational workflows, enhance productivity, and reduce costs. The increased adoption of AI Foundry and AI Force indicates that HCLTech’s AI-led approach is not only a differentiator but also a significant revenue driver for the company.

The company’s leadership in AI is further highlighted by the establishment of new GenAI Centers of Excellence across key geographies. These centers are aimed at helping clients develop and deploy customized AI solutions that meet specific business needs. HCLTech is focusing on training and upskilling its workforce in cutting-edge AI technologies, which not only strengthens internal capabilities but also enhances the quality of services delivered to clients.

Industry Recognition and Awards

The quarter saw HCL Technologies being recognized as the #1 India-headquartered company on TIME magazine’s World’s Best Companies 2024 list, reflecting the company’s strong ESG metrics, employee satisfaction, and consistent revenue growth. Additionally, HCLTech ranked No. 7 in Businessworld’s list of India’s Top 50 Most Sustainable Companies 2024 and also won the Equinix Social Governance Award for Asia Pacific.

Chairperson Roshni Nadar Malhotra underscored HCL Technologies’ focus on sustainable growth. She explained that the company has sharpened its focus on “upskilling people in next-generation technologies to continue enabling progress for clients globally.” The emphasis on sustainability and talent development, she said, positions HCLTech well to sustain its growth momentum amid growing demands for technological transformation. Malhotra added that HCLTech’s ongoing sustainability initiatives, such as reducing carbon footprints and investing in green technologies, have been instrumental in earning the company accolades from across the industry. HCLTech’s ESG initiatives not only boost the company’s reputation but also attract like-minded clients who prioritize sustainability.

Moreover, the company has invested in multiple community projects as part of its corporate social responsibility (CSR) program, which includes educational initiatives, environmental conservation, and health support activities. These efforts align with HCLTech’s vision of integrating social responsibility with business strategy, thus creating shared value for stakeholders.

Strategic Deal Wins and Market Sentiment Analysis

HCL Technologies continued to win strategic deals this quarter, securing major contracts with Fortune 500 and Fortune 200 companies across technology, financial services, and healthcare. Key among these were engagements to leverage AI and GenAI platforms for digital engineering, cloud transformation, and cybersecurity services. For example, a Fortune 50 telecommunications giant selected HCLTech to provide integrated technology services to their largest global enterprise customer across 17 countries.

Another major contract included a US-based biopharma leader that chose HCLTech to manage its SAP operations and automation-led service delivery. This partnership is expected to drive significant cost efficiencies and improved service quality for the client. Additionally, a major global semiconductor company selected HCLTech for System on Chip engineering services, a crucial area for the client’s advanced technology initiatives.

The recent deal wins are evidence of HCLTech’s growing capabilities in providing specialized and high-value technology solutions. The expansion into new verticals such as biopharmaceuticals and semiconductor technology showcases the company’s flexibility and expertise in addressing diverse industry needs. HCLTech’s focus on AI and engineering services has made it a preferred partner for enterprises seeking transformation and innovation.

From a market perspective, HCL Technologies’ stock has experienced positive investor sentiment following the release of the quarterly financials. The company’s strong results, coupled with continued investments in AI and sustainability, have been well-received in both domestic and international markets. At the time of reporting, the stock price for HCL Technologies had seen an uptick, reflecting renewed investor confidence in the company’s strategic direction and operational performance. Analysts have noted that the company’s strategic focus on AI and cloud transformation aligns well with current market trends, which has helped boost investor confidence. The robust financial performance, along with the forward-looking guidance for revenue growth, has led analysts to maintain a positive outlook on HCLTech’s future prospects.

The technology sector remains challenging, but HCLTech has differentiated itself by investing in growth areas like artificial intelligence, cloud, and engineering services—which are likely to sustain its momentum in the coming quarters. The company’s ability to deliver consistent financial results amidst market volatility showcases its resilience and strategic planning. As HCLTech continues to diversify its service offerings and innovate with AI, it is well-positioned to capture new opportunities in the fast-evolving technology landscape.