HCLTech shares drop 11% as weak outlook overshadows AI gains

Shares of HCLTech fell nearly 11% on the BSE on Wednesday after the company issued a softer-than-expected outlook following a muted March quarter performance.

CEO C Vijayakumar said the company has largely offset the impact of AI-led deflation in its traditional services business, even as automation continues to compress deal sizes.

Responding to concerns around a 2–3% annual deflation driven by artificial intelligence, Vijayakumar said the company’s growth trajectory already reflects its ability to counter this pressure through new-age offerings.

“We’ve already offset more than two-thirds of that deflation through new services,” he said, pointing to FY27 services revenue guidance of 1.5–4.5%, with a midpoint of around 3%. In FY26, the company reported overall growth of 4.8%, with organic growth at 3.8%—just about 80 basis points higher than the midpoint of its FY27 guidance.

March-quarter revenue declined 3.3% sequentially in constant currency but rose 2.4% year on year; in dollar terms, it stood at $3.6 billion, down 2.9% sequentially and up 5.3% year on year. For FY26, HCLTech reported 3.9% constant currency growth and 6% dollar growth to $14.6 billion, with Vijayakumar citing tariff volatility and weak discretionary spending as key headwinds.

The company has been investing heavily in what it calls “advanced AI” services, which has reached an annualised revenue run rate of $620 million, alongside areas such as cloud, cybersecurity and data modernisation. These offerings include AI factory, physical AI, semiconductor inferencing, design services, and IP- and platform-led solutions.

While a portion of HCLTech’s legacy business remains exposed to AI-driven disruption, the broader strategy reflects a structural transition underway in the IT services sector. Firms are increasingly focusing on building AI-led capabilities to sustain growth, even as traditional services face pricing and volume pressures.

The commentary comes amid broader concerns of slowing client spending and delayed decision-making, particularly in sectors like telecom and in key regions such as the Americas. However, Vijayakumar pointed to continued strength in financial services and technology verticals as areas supporting near-term growth.

On the operational front, the company downplayed concerns around recent layoffs, including about 120 employees in Orlando, calling it a routine adjustment linked to a specific client ramp-down. “We have over 20,000 employees in the US, and this was a planned change. It’s not indicative of broader trends,” he said, adding that there is no visible shift in client preference from onsite to offshore delivery.

HCLTech also clarified that its current guidance does not factor in the acquisition of a telecom business unit from Hewlett Packard Enterprise, as regulatory approvals are still pending. The company recently signed an agreement to acquire HPE’s Telco Solutions business for $160 million, including $15 million in performance-based incentives tied to FY25 results.

Even as restructuring continues across the sector, Vijayakumar said the company’s approach remains targeted rather than structural. “We also had some acquisitions, particularly in the auto segment, that didn’t play out as expected, which required restructuring. This is something we evaluate case by case each year; there’s no one-size-fits-all answer.”

While AI-native firms are increasingly seen as both competitors and collaborators, Vijayakumar emphasised the role of IT services companies in enterprise adoption. “While we’re not quantifying investments or payback periods, deploying frontier AI models at scale in enterprises requires deep contextual understanding. That’s where service providers like us play a key role. We collaborate with AI companies to deliver value to clients.”