While many IT majors including Tata Consultancy Services (TCS), HCL Tech, Infosys, have already released its fiscal third quarter earnings, Wipro is all set to announce its Q3 results today (January 17). Wipro will also announce a dividend for its shareholders. According to brokerage firms and analysts, Wipro is expected to post a quarterly decline in revenue as well as net profit. With Q3 being a seasonally weak quarter due to furloughs on account of Christmas and New Year holidays, Wipro’s performance will be weighed down. An analysis by Elara Capital said that dollar-denominated revenue growth for Wipro should sequentially drop due to furlough impact and unfavourable currency movements. “Furlough impact in Q3 is expected to be normal this year,” it said.
According to a CNBC TV18 poll, Wipro is expected to post Q3 revenue at Rs 22,176 crore and EBIT for the quarter is estimated at Rs 3653 crore.
Earlier on January 6, in an exchange filing, Wipro had said, “It is hereby informed that the next meeting of the Board of Directors of Wipro Limited (Company) will be held over January 16-17, 2025 to consider and approve, inter alia: a) the condensed audited standalone and consolidated financial results of the Company under lndAS for the quarter ending December 31, 2024. b) the condensed audited consolidated financial results of the Company under IFRS for the quarter ending December 31, 2024. c) declaration of interim dividend, if any, for the financial year 2024-25. The financial results will be approved by the Board of Directors on the evening of January 17, 2025.”
Analysts said that Wipro is likely to report a subdued third quarter with constant currency revenue expected to be declining, while maintaining that the IT major may be the weakest among the peers.
For Wipro, Q3 revenue growth guidance was within -2-0 per cent in CC, said Elara Capital while maintaining that revenue for the quarter is expected to decline 0.9 per cent (median of the guidance) in CC and USD revenue is projected to drop to 1.5 per cent due to cross-currency headwinds. “Wipro faced client-specific issues, which hit growth in BFS and Healthcare verticals. This may continue in Q3, which along with furloughs may drag down growth. Wipro’s margin may dip just 10 bps QoQ despite the main impact of wage hike reflecting in Q3 (salary hiked on 1 September),” the brokerage firm said. Per Elara Capital estimates, Wipro is expected to post Q3 revenue at Rs 22079.30 crore and profit for the quarter is projected at Rs 3119.60 crore, up 15.8 per cent YoY. EBIT margin, meanwhile, will be at 16.6 per cent.
JM Financial, meanwhile, said that Wipro is expected to record a drop in revenue growth by 50 bps. “We have built in two incremental months of wage hike impact. However, operational efficiencies and favourable FX will likely aid 20 bps sequential expansion in EBIT margin to 17.0 per cent. We expect Wipro to guide for a -1 to +1 per cent QoQ cc growth in Q3FY25,” it said. Per the brokerage firm, Wipro is expected to record Q3 revenue at Rs 22254.10 crore, up 0.2 per cent on-year and profit is estimated at Rs 2911.50 crore, up 8.1 per cent YoY. EBIT, meanwhile, will be at Rs 3274.10 crore, up 0.4 per cent.
ICICI Securities expected Wipro to post a decline in CC revenue growth by 1.1 per cent QoQ. It also maintained that Wipro is expected to raise its FY25 revenue growth guidance to 4- 4.75 per cent, from 3.75- 4.5 per cent. In terms of demand environment, ICICI Securities said, “Demand environment has incrementally turned positive post US elections and interest rate cut by Fed, especially in BFSI led by retail banking and mortgage. Capco business is picking up in the US but muted in Europe. Demand momentum is healthy in CPG, TTH, new-age tech companies and healthcare; whereas, demand is soft in traditional chip companies, retail, manufacturing and ERS. There is heightened competition from vendor consolidation deals in manufacturing and ER&S.” It further stated that with improved client conversions, deal TCV is expected to be in-line with quarterly average run-rate of around $1.1 billion. “Q3 will likely have two months of wage hike and impact from furloughs. Hence, we expect ~80bps QoQ margin decline,” it said.
Here are things to watch out for as Wipro will announce its Q3 earnings report on January 17:
- Investors and market participants will keep a watch on the interim announcement by the IT major. Wipro had, earlier in a regulatory filing, announced that it will declare interim dividend on January 17, on the date when the company is slated to release its fiscal third quarter earnings report. During the last quarter, Wipro board had recommended the issue of bonus shares to shareholders (including stock dividend to ADS holders) in the ratio of 1:1 (1 equity share for every 1 equity share held).
- With analysts and streets expecting Wipro to post a drop in revenue growth, all eyes will be on the IT services company’s topline. During the previous quarter as well, Wipro had posted a drop of 1.0 per cent YoY in revenue growth.
- Streets will also keep an eye on the announcement on Q4FY25 revenue guidance and outlook on margins. According to ICICI Securities, Wipro is expected to guide for -1 per cent to +1 per cent QoQ CC for Q4FY25. Analysts at HDFC Securities anticipated Wipro to deliver a revenue growth guidance of -1 to +1 per cent sequentially in CC terms for Q4.
- Another monitorable will be management commentary on any signs of stabilization in Europe and E&U vertical, large deal pipelines, TCV, revenue conversion of recent deal wins. Focus, analysts said, will be on the commentary and tonality of discretionary demand environment and budget indicators for CY25.
ICICI Securities said, “We await management commentary on: 1) demand in Capco consulting; 2) client budgets for CY25; 3) competition in vendor consolidation deals; 4) Q4 guidance; any signs of improvement; 5) pace of conversion of pipeline to TCV and TCV to revenue.”