When IT services companies start name-dropping AI, GCCs, and “mega deals,” you know they’re either about to skyrocket—or crash land in a cloud of buzzwords. Hexaware’s Q2CY25 call was an action-packed episode featuring delayed deals, margin gymnastics, and an acquisition they swear is “EPS accretive” from day one. Investors nodded, then opened Excel to see if the math added up.
Here’s what we decoded from this caffeine-fueled corporate therapy session.
At a Glance
- Revenue up 8.6% YoY – growth came dressed up in IT services; BPS just tagged along.
- EBITDA margin at 17.2% – right in the guided range, because one-offs are the new normal.
- PAT boosted by one-offs – EPS grew faster than revenue, thanks to accounting magic (and reversals).
- SMC acquisition – management calls it “transformational,” investors call it “wait and watch.”
- Outlook trimmed – growth will come… just not this quarter.
The Story So Far
Last quarter, Hexaware promised strong growth, fueled by AI, legacy modernization, and “mega” consolidation deals. This quarter, deals got delayed, macros went sulky, and management admitted Q3 won’t be the blockbuster they hyped.
Meanwhile, they went shopping—buying SMC to enter the GCC setup game. Clients love SMC’s model because it’s not the usual outsourcing trap, and Hexaware thinks this will be their golden ticket.
Investors, however, are still waiting to see if this ticket gets validated.
Management’s Key Commentary
- On Revenue:
“Growth was muted due to delayed client decisions.”
Translation: Clients ghosted us. - On Margins:
“We are on track for 17.1%-17.4% EBITDA.”
Translation: Ignore the provisions, focus on the headline. - On SMC Acquisition:
“It’s EPS accretive from day one.”
Translation: Please clap. - On AI Initiatives:
“We launched an AI-based software engineering offering.”
Translation: Because Wall Street loves AI buzzwords. - On Outlook:
“Growth expectations lowered for this year, but $3B by 2029 is intact.”
Translation: Short-term pain, long-term PowerPoint glory.
Numbers Decoded – What the Financials Whisper
| Metric | Q2CY24 | Q2CY25 | The Drama |
|---|---|---|---|
| Revenue – The Slow Jogger | $ | ↑8.6% YoY | Growth came limping, not sprinting. |
| EBITDA – The Balancing Act | 17.2% | Managed despite provisions and impairments. | |
| PAT – The Lucky Bounce | One-offs saved the day. | ||
| Cash Conversion – The Star | 76% | Cash is behaving better than growth. |
Analyst Questions That Spilled the Tea
Analyst: “When do you expect double-digit growth to return?”
Management: “Depends on macros.”
Translation: Ask the global economy, not us.
Analyst: “Will margins suffer in consolidation deals?”
Management: “We’ll sacrifice margins if needed.”
Translation: Prepare for a margin diet.
Analyst: “What’s so special about SMC?”
Management: “Clients don’t see it as outsourcing, so it’s a capability play.”
Translation: Trust us, it’s different this time.
Guidance & Outlook – Crystal Ball Section
- Q3 will grow, but not as much as initially hyped.
- Q4 could be strong if delayed mega deals close (big “if”).
- ERP costs will taper off by year-end; restructuring benefits kick in Q4.
- Long-term ambition: $3B revenue by CY29 (management swears by it).
Risks & Red Flags
- Deal delays – “mega” deals taking their sweet time.
- Margin headwinds – restructuring, ERP, and provisions lurking.
- Macro uncertainty – tariffs, trade wars, and whatever else the world throws.
- GCC play – new territory; could be game-changer or expensive experiment.
Market Reaction & Investor Sentiment
The stock yawned at the results—steady margins impressed, but the trimmed outlook left traders cold. Long-term believers still like the $3B story; short-term speculators are already hunting faster horses.
EduInvesting Take – Our No-BS Analysis
Hexaware is trying to be the cool kid in IT services—AI offerings, GCC setups, and big-ticket acquisitions. The fundamentals are solid, but growth is stuck in macro mud. The SMC buyout could open new doors, or just add fancy doors to a slow hallway.
If deals close and AI buzz translates to real revenue, Hexaware could outgrow peers. Till then, it’s a hold-your-nerves play.
Conclusion – The Final Roast
Hexaware’s Q2 call had all the elements: AI hype, delayed deals, acquisition drama, and cautious optimism. They’re building for the long haul, but investors need patience—and maybe a strong coffee—till growth kicks back in.
Written by EduInvesting Team
Data sourced from: Hexaware Q2CY25 concall transcript, investor presentation, and filings.
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