HCLTech to Restructure Overseas Operations After Q1 Profit Drops 10%

HCLTech CEO C Vijayakumar announced on Monday that the company will undergo a restructuring program during the financial year 2025–26 (FY26). This restructuring will affect both people and non-people assets, mainly outside India. The move follows a 10% drop in the company’s net profit in the first quarter (Q1) of FY26.

Vijayakumar explained that the restructuring focuses on facilities and teams abroad that are underutilised. The changes will happen gradually through Q2, Q3, and parts of Q4. The company has already factored the one-time cost of this restructuring into its FY26 financial guidance.

Despite the profit drop, HCLTech raised its revenue growth estimate for FY26 from a range of 2–5% to 3–5%. The CEO also emphasised that this restructuring is not due to macroeconomic challenges affecting the IT industry. He stated that the business environment remains stable and did not worsen as initially expected.

Reason Behind Lower Margins and Profit of HCLTech

HCLTech reported an operating margin of 16.3% in Q1, down from previous quarters. Vijayakumar attributed this to a delayed ramp-up of a key project and a one-time hit due to a client’s bankruptcy. The company aims to improve margins back to 18–19% following the restructuring.

Focus on Specialised Fresher Hiring

Ram Sundararajan, HCLTech’s Chief People Officer, revealed plans to hire freshers based on specialisation rather than numbers. The company aims to build an elite group of new hires, offering them salaries up to 3 to 4 times higher than usual. For example, services freshers could get up to 3X pay, while software freshers might earn up to 4X.

During Q1 FY26, HCLTech’s workforce slightly reduced by 269 employees but added 1,984 freshers. The attrition rate remained steady at 12.8%. Sundararajan mentioned that 15–20% of the freshers hired this year could be part of this elite cadre, with a possibility of this number rising depending on talent quality.

Specialised hiring will focus on growing fields such as data and AI, cybersecurity, and enterprise skills. Overall fresher recruitment for FY26 is expected to be much higher than the 7,829 hires made in FY25.

Strong Deal Pipeline and AI Focus

CEO Vijayakumar also shared optimism about Q2, expecting a strong total contract value (TCV) after a slowdown in Q1. New deals brought in $1.8 billion in Q1, down from $3 billion in the previous quarter, mainly because some large deals were postponed to Q2.

He stressed that these delays are unrelated to economic factors but reflect different investment paces across sectors. Clients continue to invest in AI-led digital transformation, with generative AI becoming central to HCLTech’s services.

The company is investing in an AI-driven data management platform, and AI-related projects are growing from initial proof-of-concept stages to large multi-million-dollar contracts.

Read more: TCS vs HCL Tech: Comparing Q1 FY26 Earnings Results and Stock Returns.

Conclusion

HCLTech’s restructuring plan, targeted specialised hiring, and strong focus on AI signal a strategic response to recent challenges. With a clear plan to cut underused overseas assets and build high-quality talent, the company aims to regain higher profit margins and maintain steady growth in a competitive IT landscape.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.