Information technology (IT) services major Wipro on Wednesday reported almost flat growth in net profit and a marginal decline in revenue for the second quarter of 2023-24 (Q2FY24) amid an uncertain global economic outlook and weak client demand.
The Bengaluru-based firm also forecast that its third-quarter revenue might drop by 3.5 per cent to 1.5 per cent sequentially on a constant currency basis, and attributed it to a “significant” slowdown in discretionary spending by companies. The firm had earlier projected Q3 revenue growth in the range of -2 per cent to +1 per cent.
Wipro posted a net profit of Rs 2,667 crore for the quarter ended September 30, up 0.68 per cent from a year ago, but down 7.5 per cent sequentially. It was far below the consensus Bloomberg estimates of Rs 2,906 crore.
Revenue in Q2FY24 declined 0.1 per cent to Rs 22,516 crore from the year-ago period, as against the consensus Bloomberg estimates of Rs 22,920 crore. On a sequential basis, revenue declined 1.4 per cent as deal ramp-ups slowed and clients delayed decision-making.
Wipro’s IT services revenue in dollar terms declined 4.8 per cent YoY and 2.0 per cent sequentially to $2.71 billion on the back of large deal wins of $1.3 billion — the highest in nine quarters. Wipro ended the second quarter with 22 accounts above $100 million, almost double that in FY21.
Wipro issues revenue growth guidance for the quarter ahead, while Infosys and HCLTech give projections for the full year. Infosys recently lowered its FY24 revenue growth guidance to 1.0-2.5 per cent in constant currency from 1.0-3.5 per cent earlier. HCLTech, on the other hand, cut its full-year revenue guidance to 5-6 per cent from the earlier estimate of 6-8 per cent. Tata Consultancy Services (TCS) does not provide any guidance, but has indicated a soft FY24.
“Profitable and sustainable growth is our top priority,” said Thierry Delaporte, chief executive officer and managing director, Wipro. “Against a challenging environment, we continue to take bold decisions needed to realise our long-term ambitions. We are investing in our technology infrastructure and streamlining our operations and delivery to drive profitable growth. We are training and reskilling our people, so they can be ready for an AI-driven future.”
The operating margin expanded by 100 basis points to 16.1 per cent in the second quarter from 15.1 per cent a year ago. While Wipro did not officially provide margin guidance, Wipro CFO Aparna C Iyer said during the media briefing that margins for the third quarter were likely to be “range-bound.”
In terms of verticals, banking, financial services and insurance (BFSI) and consumer contribute more than 50 per cent to the overall revenues. While BFSI declined 3.1 per cent YoY in constant currency, consumer declined 2.6 per cent.
The voluntary attrition rate, on a last 12-month basis, reduced to 15.5 per cent in Q2FY24 from 17.3 per cent in the previous quarter, indicating that it is gradually coming down in line with the industry trend. Wipro’s workforce declined by 5,051 employees, taking the total headcount to 244,707.
Analysts believe that Wipro has the potential to enhance its financial performance due to strong customer loyalty and a robust business opportunity pipeline. “Consumer spending expectations have been slightly affected by higher-than-expected inflation rates. Additionally, there’s a delay in the decision-making process, leading to an extended deal-signing timeline…Presently, Wipro has a healthy project pipeline, and its strategic outlook is promising. Aligning execution with strategy can propel enhanced financial performance,” said Biswajit Maity, senior principal analyst, Gartner.
As part of his efforts to turn around the company, Delaporte has been executing a five-point strategy he laid out soon after joining the company. The strategy involves accelerating growth through prioritization of sectors and markets, strengthening relationships with strategic clients and partners, 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.
Wipro has also merged its wholly-owned subsidiaries – Wipro HR Services India, Wipro Overseas IT Services, Wipro Technology Product Services (formerly known as Encore Theme Technologies Private Limited), Wipro Trademarks, and Wipro VLSI Design Services India – with itself.