Hexaware Technologies Shares Decline 7% After Muted Q4 Earnings

IT Services Firm Reports Sluggish Sequential Growth Despite Strong Year-on-Year Performance

Hexaware Technologies witnessed a sharp 6.9% decline in its share price on Friday, closing at ₹763.45 on the BSE, following the release of its Q4 FY24 earnings report. While the IT services company reported a 66.3% YoY jump in net profit, concerns over sluggish sequential growth and macroeconomic headwinds weighed on investor sentiment.

Highlights of Hexaware Technologies’ Q4 Results

• Net profit rose 66.3% YoY to ₹320.7 crore from ₹192.8 crore in Q4 FY23.
• Revenue increased 20.6% YoY to ₹3,154 crore.
• Constant currency (CC) revenue growth stood at just 0.2% QoQ, signaling a slowdown in demand.
• EBITDA margin improved by 30 bps QoQ to 16.3%.
• Revenue in US dollar terms declined by 0.5% QoQ to $372 million from $374 million in Q3 FY24.

Muted Sequential Growth Raises Concerns

Despite strong year-on-year (YoY) growth, Hexaware Technologies’ weak quarter-on-quarter (QoQ) performance has led to concerns about its near-term outlook.

• The company’s constant currency revenue growth of 0.2% QoQ indicates sluggish demand, making investors cautious.
• US dollar revenue declined by 0.5% QoQ, highlighting macro headwinds in key markets.
• This was the first earnings report since Hexaware’s re-listing, adding pressure on the stock to deliver strong numbers.

Macroeconomic Challenges & Market Outlook

Hexaware Technologies acknowledged that macroeconomic conditions have turned marginally negative in recent weeks. However, the company remains optimistic about resilience in 2025, with expectations of a ramp-up in the second half of the year.

• Two of the company’s top three clients are undergoing consolidation, a process that Hexaware has won.
• Major growth momentum is expected in Q3 FY25, with additional consolidation deals in progress.
• If the company secures these deals, ramp-ups could extend into Q4 FY25, aiding long-term revenue growth.

Regional Growth Performance

Hexaware’s geographical revenue growth in CY24 was mixed, with varying performances across markets:

• America: 17.7% growth (Strongest performing region)
• Asia-Pacific (APAC): 6.5% growth
• Europe: 3% growth
• However, European revenue in Q4 declined by 9.7%, signaling potential economic slowdowns in the region.

Operational Performance & Workforce Data

• Cash balance stood at ₹1,977 crore as of December 31, 2024.
• Total headcount reached 32,309, with a net addition of 4,017 employees in 2024.
• IT sector voluntary attrition was at 10.8%, indicating stability in workforce retention.

Stock Performance & Market Reaction

Before the earnings announcement, Hexaware Technologies’ stock closed at ₹819 on Thursday, 15.5% above its issue price of ₹709. However, after the muted Q4 results, the stock declined 5.7% to ₹771.89 and fell further by 6.9% on Friday, reflecting investor concerns.

Investor Takeaways & Future Outlook

Despite the near-term concerns over sequential revenue growth, Hexaware Technologies’ strong YoY growth, healthy cash balance, and upcoming client ramp-ups offer long-term stability. However, investors should monitor macroeconomic conditions and deal conversions, which could influence the company’s performance in H2 FY25.

With the stock still trading above its IPO issue price, the market may be looking for stronger sequential growth catalysts before regaining confidence in the company’s near-term prospects.