Despite doubling down on its generative AI narrative and forging a new partnership with OpenAI, HCLTech opened FY26 with a 9.7% drop in profit YoY, signalling that GenAI optimism has yet to translate into financial strength.
In Q1 FY26, the company reported a net profit of ₹3,843 crore, down from ₹4,257 crore in the same quarter of the previous year. Revenue from operations stood at ₹30,349 crore, showing little movement from the previous quarter’s ₹30,246 crore, but a 3.7% growth YoY.
This time, the firm reported nine exclusive generative AI deals, down from 12 in the last quarter.
While CEO C Vijayakumar said the company’s AI propositions are “resonating well” with clients and have been “augmented further by our partnership with OpenAI.” He claimed a 3.7% YoY revenue growth in constant currency, driven by a 4.5% growth in Services, which reflects broader caution in IT spending.
“Historically, our Q1 has been a soft quarter,” Vijayakumar said during the press conference.
HCLTech attributed its declining operating margin partly to ramp-downs in specific areas, which led to a larger bench. The company also cited productivity gains, location-skill mismatches, and a one-time client bankruptcy as contributing factors to the decline.
Despite margin pressure, HCLTech reported strong client additions across revenue bands. On a year-on-year basis, the company added six clients in the $50 million category and 11 in the $20 million bracket.
New bookings for the quarter stood at $1.8 billion, which Vijayakumar called a “decent” performance. However, some large deals expected to close in Q1 slipped into Q2, which he said is not because of macroeconomic conditions. “If all goes as planned, the TCV number should see a step-up in the coming quarter,” he added.
HCLTech concluded FY25 with subdued performance despite ramping up its generative AI narrative. This quarter as well, the company cited “lower utilisation” and increased investments in GenAI and go-to-market (GTM) efforts.
The guidance for FY26 was revised slightly: HCLTech now expects 3–5% revenue growth in constant currency (down from 2–5% previously), with Services revenue also projected in the same range.
HCLTech underscored the scale of its internal GenAI investments, revealing that over 127,000 employees are now trained and certified as foundational AI users.
Within this, 42,000 have completed advanced GenAI training, and approximately 12,000 employees are currently hands-on practitioners working on GenAI projects.
HCLTech’s AI is Still Better than Other IT Firms
Alongside OpenAI, the company entered into a new partnership with UiPath to accelerate Agentic automation and launched a suite of agentic AI solutions in collaboration with Google Cloud. It also integrated NVIDIA AI Enterprise into AI Force and connected NVIDIA Omniverse with its physical AI offerings.
Kalyan Kumar, chief product officer at HCLSoftware, said during the earnings call that the demand for agentic AI products is increasing amongst the clients.
“We’re also seeing new business models emerging — what we’re calling service-as-a-software,” Kumar said, where the focus is on outcomes enabled by autonomous agents rather than licenses.
HCLTech's bold positioning on generative AI makes it stand out. It has recently announced its partnership with OpenAI in a multi-year strategic deal to drive enterprise AI. It’s a one-of-a-kind deal in India’s IT landscape, marking a direct partnership with OpenAI.
Read: HCLTech’s OpenAI Deal Breaks New Ground for Indian IT
While most IT firms are still accessing OpenAI’s models via Microsoft’s Azure OpenAI service, HCLTech’s direct collaboration gives it privileged access to the ChatGPT maker’s AI portfolio, positioning it uniquely at the forefront of enterprise AI adoption.
Vijayakumar also claimed that AI and GenAI now feature in nearly every deal, with agentic AI gaining traction for use cases in operational efficiency and application modernisation.
In the last quarter, Vijaykumar stated that HCLTech is scaling its AI infrastructure through initiatives like AI Labs, which have delivered 500 GenAI projects across 400 clients in FY25.
The firm expects GenAI to shrink project timelines and redefine pricing, with Vijayakumar acknowledging that AI-driven efficiencies are already leading to pricing deflation.
Meanwhile, TCS opened the new fiscal year with disappointing numbers and familiar challenges, and little to no confidence in generative AI. Revenue for Q1 FY26 came in at ₹63,437 crore, up just 1.3% YoY, but down 3.1% in constant currency, making it another poor quarter for the company.
No specific AI-led deal wins were disclosed by TCS, nor was there evidence that GenAI services have offset the broader demand slowdown. Despite this, Aarthi Subramanian, executive director and COO, said, “Clients are increasingly shifting their focus from use case-based approach to ROI-led scaling of AI.”
This performance of TCS and HCLTech echoes what’s becoming a pattern among leading Indian IT firms–a widening gap between AI narratives and actual numbers.
While GenAI is now mentioned in almost every customer conversation, its impact on top-line growth and profitability remains elusive.
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