Summary
Hexaware Technologies Limited - Q4 CY25 Earnings Call Summary Thursday, February 05, 2026 4:00 PM IST
Event Participants
Executives 3 Niraj Khemka (Head of IR), R Srikrishna (CEO), Vikash Jain (CFO)
Analysts 5 Ankur Rudra, Anmol Garg, Dipesh Mehta, Prateek Maheshwari, Vibhor Singhal
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Revenue | $389 million | -1.5% QoQ; impacted by seasonal furloughs (-$9m) and lower license sales (-$7m). |
| Revenue Growth (FY) | 7.6% (USD) | +7.1% YoY in Constant Currency; performance supported by Financial Services. |
| Reported EBITDA | 17.0% | Included one-time credits; normalized EBITDA stood at 15.4%. |
| Normalized EBITDA | 15.4% | -210 bps QoQ; driven by merit increases (-90 bps), calendar/utilization (-120 bps). |
| Net Profit (EPS) | ₹4.79 (Reported) | Impacted by ₹105 crore ($12.5m) labor code charge; adjusted EPS is ₹6.15. |
| Headcount | 33,918 | +254 net adds QoQ; IT added 585 while BPS declined by 331. |
| Utilization | 78-80% (Est.) | -300 bps QoQ; split between furloughs (100 bps), leaves (100 bps), and bench building (100 bps). |
| Attrition (IT) | 11.0% | Remained stable and among the lowest in the industry. |
| Cash Balance | $235 million | Debt-free balance sheet with robust OCF/EBITDA conversion of 76%. |
| Days Sales Outstanding | 67 days | Improved from historical 70-72 day range, aiding cash flow. |
Geographic & Segment Commentary
- Financial Services (FS) & Banking: Banking delivered its third straight quarter of strong sequential growth, driven by scaling existing accounts and new logos. FS remained the strongest vertical for the full year, absorbing significant budget cuts from a major Government Sponsored Enterprise (GSE) client.
- Healthcare & Insurance (H&I): Experienced a sequential decline due to high license revenue in Q3 but saw the maximum deal traction from new logos. The segment is shifting focus toward Life Sciences and Insurance to offset flattish US Medicare spending trends.
- Technology, Products & Platforms (TPP): A newly formed vertical (split from HTPS) focusing on software engineering and SaaS replacement. Management expects fast growth from this segment in CY26, albeit from a smaller revenue base.
Company-Specific & Strategic Commentary
- AI Strategy & SaaS Replacement: Launched “Zero License” offering to help clients exit licensed software using Agentic AI. Management estimates AI can provide 20-40% productivity gains, which acts as a revenue dampener that must be offset by volume.
- Legacy Modernization: Focused on the RapidX platform for legacy reverse engineering. Management expects 2-3 large-scale legacy modernization projects to complete in CY26.
- Private Markets Focus: Appointed Amit Vij as Chief Private Markets Officer to target private equity-backed firms, viewing these as high-value creation opportunities.
- Deal Pipeline: For the first time, the total deal pipeline crossed $4.0 billion. Key wins in Q4 included a major consolidation deal with a “Big Tech” firm and a global pet insurance provider.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Revenue Growth | >7.6% for CY26 | Expects acceleration every quarter after a seasonally weak Q1; based on strong Q4 bookings. |
| EBIT Margin | 13.0% to 14.0% | New reporting metric; H1 will be lower due to rebadging/ramp-up costs, with a stronger exit in H2. |
| Effective Tax Rate | 25.0% to 26.0% | Normalized rate for CY26 following one-time earn-out reversal impacts in Q4 CY25. |
| Q1 CY26 Outlook | Weak/Headwind | Impacted by 100 bps calendar headwind and a 70 bps annualized hit from a GSE client budget cut. |
Risks & Constraints
| Risk | Context |
|---|---|
| Client Concentration & Budget Cuts | A major GSE client implemented significant budget cuts (70 bps impact); a pending consolidation deal with this client remains a “work in progress.” |
| AI Revenue Dampening | AI-driven productivity (20-40%) reduces billable hours for existing scope, requiring Hexaware to significantly increase deal volume to maintain growth. |
| Integration & Execution | Recent acquisitions like Softcrylic missed financial targets, leading to a $25m earn-out reversal and $15m impairment; further M&A entails execution risk. |
Q&A Highlights
AI Impact on Revenue
- Question: How does AI impact renewal pricing? (Ankur Rudra)
- Answer: For the same scope of work, AI can reduce costs by 20-40%. Hexaware is baking these dampeners into its CY26 forecasts while looking for growth through higher volumes and new services. (R Srikrishna)
Margin Dilution
- Question: Why is the margin guidance being downgraded by ~100 bps? (Vibhor Singhal)
- Answer: The dilution is temporary, driven by large deal ramp-ups in H1 CY26 that include significant rebadging components. Margins are expected to recover to “normal” levels in H2. (R Srikrishna)
Utilization and Bench
- Question: Why has utilization dipped despite headcount growth? (Anmol Garg)
- Answer: The dip was intentional to build a bench (100 bps impact) for upcoming deal ramp-ups in early CY26, alongside seasonal leave patterns. (Vikash Jain)
Deal Wins & Pipeline
- Question: What is the quality of the bookings and pipeline? (Dipesh Mehta)
- Answer: CY25 bookings and year-end pipeline are “materially better” than CY24. Recent wins like the Big Tech consolidation give Hexaware “the right to hunt” in large spend pools. (R Srikrishna)
Key Takeaway
Hexaware Technologies reported a transitionary Q4 CY25, with revenue of $389 million reflecting seasonal furloughs and a 1.5% sequential decline. Despite macro headwinds and a significant budget cut from a GSE client (70 bps impact), the company achieved 7.6% USD growth for the full year and hit a record $4 billion deal pipeline. Strategically, Hexaware is pivoting toward an AI-first delivery model, launching “Zero License” services to challenge the SaaS market and integrating AI agents into its Tensai and RapidX platforms. Management guided for CY26 revenue growth to exceed the 7.6% achieved in CY25, characterized by a weak Q1 followed by sequential acceleration. While EBIT margins are expected to be lower at 13-14% due to initial rebadging costs for large deals, the company maintains a robust net cash position of $235 million and expects H2 CY26 to exit with strengthened profitability as new contracts reach steady-state.
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