Wipro sees pressure on revenue growth in Q4; net profit falls 12% in Q3

IT major Wipro has forecast a muted sequential revenue growth of -1.5 per cent to 0.5 per cent in constant currency for the fourth quarter ended March 2024 as deal ramp ups and client decision making are yet to gain pace.

Margins for the second quarter are likely to be “range-bound” similar to the last few quarters, the management said during a media briefing.

Bengaluru-based Wipro posted a net profit of Rs 2,700 crore for the third quarter ended December 2023, down 12 per cent from a year ago but up 1.2 per cent quarter-on-quarter (Q-o-Q), above the consensus Bloomberg estimates of Rs 2,685 crore.

The revenue for the December quarter declined 4.4 per cent from the year-ago period to Rs 22,205 crore. This is slightly below Bloomberg estimates that pegged the revenue at Rs 22,293 crore.

On a sequential basis, revenue declined 1.4 per cent as key verticals like banking, financial services & insurance (BFSI), consumer, and manufacturing slowed down.

IT services revenue in dollar terms declined 6.9 per cent year-on-year (Y-o-Y) and 1.7 per cent sequentially in constant currency to $2.66 billion. It was on the back of large deal wins worth $900 million in total contract value (TCV).

“In a seasonally-soft quarter, deal booking momentum remained strong. Our large deals recorded a 20 per cent year-to-date growth. Further, we are starting to see early signs of a return to growth in consulting, as demonstrated by the double-digit growth in order bookings in our Capco business,” said Thierry Delaporte, chief executive officer (CEO) and managing director (MD), Wipro.

“Under our ai360 strategy, AI is now embedded across most of our existing solutions and client offerings. We are deploying AI internally across all business and functional areas as well, with the goals of efficiency, productivity, and scale,” Delaporte added.

The operating margin contracted to 16 per cent in the December quarter from 16.3 per cent a year ago and 16.1 per cent in the preceding three months.

In terms of verticals, BFSI and consumer contribute more than 50 per cent to Wipro’s overall revenues. While BFSI declined 13.2 per cent Y-o-Y in constant currency, consumer fell 8.1 per cent.

Voluntary attrition rate, on a 12-month basis, for the December quarter reduced to 14.2 per cent from 15.5 per cent in the September quarter, indicating it is gradually coming down, a trend seen across the industry.

Responding to a media query on the recent leadership exits, Delaporte said it is “part of the company’s strategy” to turn around. Delaporte has been executing a five-point strategy he laid out soon after joining the company.

The strategy involves accelerating growth through prioritisation of sectors and markets and strengthening relationships with strategic clients and partners. It also involves enhancing the company’s portfolio of business solutions, building talent at scale, and simplifying the operating model.

Effective April 1, 2023, Wipro announced four strategic global business lines (GBLs) to deliver its capabilities, organised around cloud, enterprise technology and business transformation, engineering, and consulting.

“Despite Q-o-Q revenue drop, Wipro's future looks promising because of its strong customer focus and business pipeline. Some clients are taking longer to make decisions.

But if you see the broader picture, Wipro has a strong vision, good transformation capability, and a strong commitment to sustainability,” said Biswajit Maity, senior principal analyst, Gartner.

Wipro announced its earnings after market hours on Friday. Ahead of its earnings, Wipro shares were up 3.9 per cent to close at Rs 465.45 on the BSE.