HCL Tech, India's third largest information technology corporation, is set to report financial results for the second quarter (July-September) of fiscal year 2024-25 (Q2FY25) on Monday, October 14.

In comparison to the September quarter of FY24, the Indian IT major is likely to see a single-digit increase in both topline and bottomline revenue. According to brokers, the company's product business revenues may fall, but this will be compensated by growth in the services section. Analysts estimate its total contract value (TCV) to decline year on year.

As per a credible source, HCL Tech is expected to report an average net profit of Rs 4,068 crore in Q2FY25, up 6% year on year (Y-o-Y) from Rs 3,837 crore in Q2FY24. Meanwhile, profits may fall by 1.6 percent quarter on quarter, compared to a profit after tax (PAT) of Rs 4,135 in the June quarter of FY25.

HCL Tech's average revenue could climb by 7.1% year on year to Rs 28,589 crore from Rs 26,674 crore in Q2FY24. Sequentially, revenues may only increase by 1.8%. In the June quarter of FY25, the company had revenues of Rs 28,058 crore. 

Key monitorables: The street will be looking for answers from the company on new deal TCV, which has been relatively weak in recent quarters, the impact of the Verizon deal anniversary on revenues, any recovery in discretionary spending in the services segment, and the environment required to achieve an aspirational margin band of 19-20%.

Furthermore, leading brokerages estimate the following from HCL Tech's Q2 results:

HSBC: Analysts at HSBC expect all verticals to increase except banking, due to the planned disposal of the State Street unit. Revenue is expected to climb by 1.5 percent quarter over quarter, with a 60 basis point favorable FX impact.

Margins are expected to rise sequentially, driven by improved operating leverage in the ER&D segment. Key focus areas include HCL Tech's previously stated FY25 revenue growth target of 3-5 percent, with a particular emphasis on contract ramp-downs and the forecast for the ER&D sector.

Nuvama Institutional Equities: Nuvama analysts estimate HCL Tech to report 1.3% quarter-on-quarter growth in constant currency (CC) and 1.9% in dollars, driven by IT Services (+2% QoQ), Engineering R&D (+1.2% QoQ), and Products & Platforms (+2% QoQ).

The EBIT margin is expected to rise by 70 basis points quarterly. HCL Tech expects to retain its FY25 revenue growth target of 3-5 percent in CC for Services and an EBIT margin of 18-19%.

Kotak Institutional Equities: KIE analysts forecast 0.8 percent constant currency revenue growth for HCL Tech, with an 80 basis point impact from the sale of its interest in the State Street BPO business.

Product revenues may fall, but should be compensated by service growth, excluding the BPO area. EBIT margin is predicted to grow by 100 basis points quarter on quarter due to seasonal upticks, wage cycle shifts, and efficiency efforts.

TCV is expected to climb 15% sequentially to $2.2 billion, despite a year-over-year fall. c is projected to retain its FY2025E sales growth target of 3-5 percent and an EBIT margin of 18-19 percent.

HCL Tech is expected to maintain its FY25 guidance of 3-5% CC growth and 18-19% EBIT margin. Key items to monitor are FY25 guidance, ERD/Products outlook, deal TCVs, discretionary spending, and attrition.