HCLTech's Advanced AI revenue accounted for about 5% of overall revenue in the first quarter and should continue to grow at a healthy year-on-year pace, according to Citi.
Citi said HCLTech sees new opportunities across its IT services, engineering and business process outsourcing businesses as artificial intelligence changes how these services are delivered. The company is also pursuing opportunities in physical AI, edge inferencing chip design and sovereign AI solutions.
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HCLTech sees its Advanced AI business as a new total addressable market, Citi said. The brokerage noted that the company's Advanced AI revenue is not directly comparable with disclosures from other companies because HCLTech does not include data offerings in the figure.
Citi said HCLTech believes AI will create opportunities across multiple verticals and could also support growth in its existing businesses. The brokerage expects AI adoption to drive some level of deflation in existing services, while areas such as legacy modernisation and agentic AI adoption in enterprises could provide growth.
The brokerage also said HCLTech sees an opportunity in data centres as AI demand grows. The company plans an initial investment of about Rs 35 billion in its data centre business, with the opportunity expected to be largely domestic initially. HCLTech is also open to serving global customers, including US start-ups that need capacity to train AI models, Citi said.
Citi said progress in Advanced AI was encouraging but retained its Sell rating on HCLTech. It said the stock trades at a premium to large-cap peers.
The brokerage expects HCLTech's software business to recover after a sluggish period. It forecasts revenue growth of 3%-4% in the software business and about 5% annual EPS growth through FY29.
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