Wipro, India’s fourth-largest IT firm, managed to post revenue slightly above estimates for the September quarter, driven by large deal wins, even as it awaits a pickup in discretionary spending amid broader macro-economic headwinds. However, net profit came slightly below what analysts expected due to a one-time cost and continued growth-related margin pressure.
Overall, both revenue and net profit showed a marginal sequential rise after declining in the June quarter. In Q2, net profit rose 1.2% sequentially to Rs 3,246.2 crore, slightly lower than Bloomberg estimates of Rs 3,278 crore. Revenue from operations rose 1.8% quarter-on-quarter to Rs 22,697.3 crore, just ahead of estimates of Rs 22,688 crore.
“As far as the discretionary spend is concerned, I’m not seeing a dramatic uptick, but the spend is now moving more into AI-related projects,” said Srini Pallia, CEO and managing director, Wipro, during its post-earnings press conference.
“This is a quarter where most of our clients will go in for a budgeting process.
As we meet our clients in the next couple of months, we’ll get to know more. We will have a better view of discretionary spends in the month of December or January,” he added. Despite the dampened client spending environment, Wipro booked $4.7 billion worth of deals in Q2, of which $2.9 billion were large deals.
Deals worth $30 million or more in total contract value terms constitute large deals for Wipro. For comparison, the company booked $5 billion worth of deals in the June quarter, of which $2.7 billion were large deals. Pallia noted that vendor consolidation and cost optimisation deals still continue to be the focus, while there’s new demand picking up in AI-related projects.
“Clients want to move away from proof-of-concepts to actually implementing AI across the business process and workflows. AI is also creating new opportunities for us to be truly consulting-led in terms of AI advisory and data advisory,” he added.
During the quarter, operating margin in its largest segment, IT services, contracted 60 basis points to 16.7% due to a provision of Rs 116.5 crore made related to the bankruptcy of a customer.
Adjusted for that, margins came in at 17.2% compared with 17.3% in the June quarter. Last quarter, the management had noted that large deals need certain upfront investments to convert into revenue, which will keep its margins under pressure and within this narrow band.
In terms of geographies, three out of four of its strategic markets saw sequential growth in the September quarter, with banking, financial services and insurance (BFSI) clients leading the growth in Europe, which forms 26% of its revenue. BFSI is the largest vertical for Wipro, contributing about 34% of its revenue.
For the December quarter, the company expects its IT services business segment to grow in the range of -0.5% to 1.5% in constant current terms, translating to revenue in the range of $2.59-2.64 billion. For comparison, in Q2, the IT services segment reported a 0.7% sequential rise in revenue to $2.6 billion against the company’s guidance between $2.56-2.61 billion.
Headcount up by 2,260; No call on wage hike yet
After declining in the June quarter, Wipro increased its employee strength by 2,260 in the September quarter, including onboarding 2,900 freshers. Its total headcount now stands at 235,492 employees, with net utilisation continuing to improve sequentially to 86.4% from 85%.
“We will continue to hire based on demand, despite the fact that the number of working days in Q3 is less,” said Chief Human Resources Officer Saurabh Govil, adding that the company hasn’t yet taken a call on wage hikes, as the macroenvironment continues to be uncertain.