Wipro is likely to see flat sequential revenue growth in the quarter ended June, but the topline is expected to surpass the midpoint of its guidance range of (-1.5%) to 0.5%, analysts said. Many industry analysts believe the worst is behind the company and have provided a cautiously optimistic outlook regarding Wipro’s performance.
Five brokerage firms, on average, expect Wipro’s revenue to rise marginally to Rs 22,261 crore in April-June from Rs 22,208.3 crore in the March quarter. The company is set to announce its Q1 earnings on July 19.
An earnings preview report from Kotak Institutional Equities stated: “We expect flat revenues for the quarter. We attribute relatively strong performance to strength in Capco and likely recovery in the Americas market. We expect strong deal signings after multiple quarters of disappointment.”
Similarly, JM Financial Institutional Securities expects a 0.2% constant currency revenue growth, with a 20 basis points cross-currency headwind translating into flat quarter-on-quarter (q-o-q) revenue growth for IT services. “We expect the pick-up in Capco to continue to drive BFSI segment growth,” the brokerage firm said in a report.
Further, brokerages expect Wipro’s operating margins or earnings before interest and tax (Ebit) margin to improve due to the company’s cost containment and efficiency measures.
“We forecast a 30 basis point increase in Ebit margin q-o-q,” Kotak said. Nomura also highlighted continued cost control programs and higher utilisation at Capco as key drivers behind a projected 30 basis point expansion in Ebit margins.
In the March quarter, the company’s operating margin stood at 16.4%. Meanwhile, the net profit is projected to increase by 4% q-o-q to Rs 2,958 crore.
Deal wins and sector performance
Following several disappointing quarters, Wipro has shown signs of robustness in its deal signings in the June quarter, including a landmark mega-deal in the communications vertical—its first since 2021. This is anticipated to catalyse growth and bring positive momentum.
The banking, financial services and insurance (BFSI) segment, driven by Capco’s performance, is also expected to see continued growth despite sustained stress in other sectors such as telecom and hi-tech, JM Financial Institutional Securities said.
The consulting business, particularly in the BFSI vertical, is expected to show signs of recovery. ICICI Securities pointed out some positive developments in this area, likely influenced by Capco’s performance and broader market trends. However, sectors like retail and communications might see continued softness due to cautious client spending behaviours, as indicated by Motilal Oswal Financial Services.
Additionally, the appointment of Srinivas Pallia as CEO is seen as a significant leadership shift aimed at revitalising Wipro’s strategic direction. “Srini’s deep-rooted experience within Wipro and his recent leadership in the Americas provide him with a unique perspective to steer Wipro back to its former growth trajectory,” Nomura said.
Guidance and outlook
Looking forward, Wipro is expected to maintain a guidance of 0-2% revenue growth in the next quarter, with particular attention to the consulting segment’s recovery and large deal pipelines.
“Investors and stakeholders will likely focus on the efficacy of the new CEO’s strategies, the sustenance of momentum in consulting, and Wipro’s positioning in critical deals,” Kotak said in its report.
