Are IT companies facing a bigger problem beyond weak Q4 results? Expert weighs in

Shares of HCL Technologies saw a sharp fall of around 11% in a single day after the company reported weaker-than-expected Q4 results and trimmed its growth outlook. The drop reflects investor concerns over slowing demand and changes in the IT business model.

According to Devarsh Vakil of HDFC Securities, the numbers came in below market expectations, which triggered the sharp reaction. He explained that the issue is not just about one weak quarter, but a broader shift in how IT companies operate.

Vakil said the challenges facing IT companies are not temporary, but structural, noting that the business model is shifting from effort-based billing to a more outcome-based approach.

HCLTech reported muted growth, with constant currency revenue rising just 0.1% quarter-on-quarter. Some key segments also saw a decline, raising concerns about future performance.

Vakil said that delays in large deals and reduced client spending are not just short-term issues but could lead to permanent loss of business in some cases. This has also led to a cut in future growth guidance.

He added that while the overall outlook remains cautious, there may still be selective opportunities within the sector for investors.

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