India's HCLTech results beat on financial services boost; enters data center business

By Haripriya Suresh and Sai ‌Ishwarbharath B

BENGALURU, July ​13 (Reuters) - HCLTech, ​India's third-largest software services exporter, beat profit and revenue expectations for the first quarter on Monday, buoyed by strength in its financial services and a weak ‌rupee.

The company also retained its annual revenue forecast while announcing a foray ⁠into the data center business.

Analysts have lowered their expectations for India's $315 billion IT industry as global clients cut ‌non-essential tech spending and fears mount ‌that advanced AI tools could disrupt the business models of software companies.

HCLTech's deal wins of $2.4 billion, its highest ever in the first quarter, are a positive indicator, CEO C ​Vijayakumar said in a press conference.

"There has been some impact due to West Asia (conflict), which started in March, and some of that is continuing. Some of the discretionary spend ⁠softness continues to be there, but we see a large pipeline, very healthy booking. We expect strong booking even in Q2," ​he said.

A weaker rupee also boosted revenue for IT firms as they bill clients in foreign currencies, while incurring most costs in rupees.

HCLTech ​posted a 13.9% year-on-year rise in revenue to 345.79 ‌billion rupees ($3.62 billion) during the June quarter, against analysts' average estimate of 343.5 billion rupees, according to LSEG data.

Revenue in constant currency, or stripping ⁠out exchange-rate effects, rose 2.6%.

Analysts said the company's performance in financial services and retail segments was positive, with the financial services segment being the secular growth driver for the industry.

"It's a good set of ⁠numbers, but the FY27 guidance has not increased or narrowed. That was the biggest monitorable, particularly because the ​company won a $1.14 billion deal this month. From that perspective, this was slightly disappointing," said Sushovon Nayak, analyst at Anand Rathi.

HCLTech also saw a net reduction in headcount of over 3,000, the steepest drop in ‌eight quarters.

The company announced a foray into the data center business, for which it plans to invest 35 billion rupees with the potential ‌to scale to 50 megawatts of capacity.

"While the investment could modestly weigh on cash flows in the ⁠near term, it positions HCLTech to ‌participate across the full AI ​value chain," StoxBox research analyst Sagar Shetty said.

($1 = 95.6200 Indian rupees)

(Reporting by Haripriya Suresh and Sai Ishwarbharath B in Bengaluru; Editing by Shilpi Majumdar and ‌Devika Syamnath)

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