Wipro Q2 preview: Revenue may jump 17% YoY; profit seen dropping up to 6%

Wipro Q2 results preview: Its margins will likely be weak over the last year, but may improve on a quarterly basis by 20-30 basis points (bps) to 15.3 per cent

IT services major Wipro is set to release its July-September quarter (Q2FY23) earnings on Wednesday, October 12. 

Brokerages estimate the company to post a revenue growth of 15-17 per cent on a year-on-year (YoY) basis to around Rs 22,612 crore on the back of large deal wins during the quarter such as the acquisitions of consulting firms Rizing and Convergence. 

Profit, on the other hand, is expected to decline by as much as 6.5 per cent from last year. But, it will likely increase in the range of 7-13 per cent sequentially to around Rs 2,825 crore, as per the average of six estimates compiled by Business Standard. 

Similarly, margins will likely be weak over the last year, but may improve on a quarterly basis by 20-30 basis points (bps) to 15.3 per cent as operating leverage and pricing may offset wage hike, and travel costs pressures, analysts said. 

Key monitorables: December quarter (Q3) guidance, hiring plans, demand impact if any, especially in Europe, commentary on the large deal wins, outlook on verticals, attrition trends, and variable payout update

Here’s an overview of what brokerages expect from Wipro: 

Jefferies: The company’s growth will be aided by a 100 bps inorganic contribution from Rizing and Convergence acquisitions. Wipro is likely to deliver a 4 per cent QoQ constant currency (CC) revenue growth. Its margins may expand by 20 bps QoQ with the impact of wage hikes (that came into effect from Sept 1), supply-side pressure and higher travel costs to be offset by pyramiding, operating leverage and some pricing benefit. 

Nomura: Revenue growth is assumed to be at the mid-point of Q1 (3-5 per cent) guidance. which translates into a 5.5 CC quarterly growth. The management had indicated that margins bottomed out in Q1, and while some margin gains are expected to have been reinvested in talent retention in Q2, firm-wide wage hikes remain due in the December quarter, giving margins room to expand this quarter. 

PhilipCapital: The company’s IT services constant currency (CC) revenues are expected to grow 4 per cent in line with its guided range of 3-5 per cent on large deal ramp-ups. Margins are likely to increase modestly by 20 bps QoQ. Wipro may guide for 1-3 per cent QoQ CC growth for the December quarter. 

Kotak Institutional Equities: We forecast CC revenue growth of 4 per cent to be led by a 130 bps contribution from the Rizing acquisition. We expect a modest 30 bps increase in EBIT led by aggressive compensation control and increase in utilization rates. 

IDBI Capital: The company is estimated to report a quarterly topline growth of 5 per cent in CC terms. However, cross currency impact of 110 bps will lead to a 4 per cent QoQ growth (includes inorganic growth of 1 per cent). Wipro may guide for a 0-2 per cent growth rate for Q3FY23.