Wipro keeps IT momentum going; Q1 profit rises 10.9% to ₹3,330 crore

Guidance for the second quarter improves

India’s fourth-largest information technology (IT) services player, Wipro, reported a 10.9 per cent rise in net profit to ₹3,330 crore for the first quarter (Q1), compared to a year ago. Sequentially, profit was down 6.7 per cent.

 

Revenue for Q1 (April-June) stood at ₹22,134.6 crore, marginally up by 0.77 per cent year-on-year (Y-o-Y). Revenue was down 1.6 per cent on a quarter-on-quarter (Q-o-Q) basis.

 

The company’s Q1 performance marginally beat Bloomberg estimates. According to Bloomberg, revenue was expected at ₹22,078.3 crore and net profit at ₹3,249.4 crore.

 

IT services segment revenue stood at $2,587.4 million, a decrease of 0.3 per cent Q-o-Q and 1.5 per cent Y-o-Y.

 

On a constant currency basis, which excludes the impact of currency fluctuations over which companies have no control, IT services segment revenue declined 2.3 per cent compared to last year and 2 per cent sequentially. Those numbers came in the mid-range of the guidance provided in April, when the company said revenue would degrow in Q1 by 3.5 per cent at worst and 1.5 per cent at best. 

 

Wipro Chief Executive Officer Srini Pallia attributed the drop in revenue to a muted quarter amid continuing macroeconomic uncertainty. “We remain cautious in this environment, and the uncertainty continues,” he said on Thursday.

 

The company, however, had healthy deal bookings, which stood at about $5 billion for the quarter ended June 30. That number nearly doubled compared to the same period last year. Large deal bookings — classified as equal to or greater than $30 million in total contract value — were up 131 per cent to $2.66 billion.

 

That led the IT services player to improve its guidance for the second quarter (July-September). Wipro now expects to degrow by 1 per cent at worst, or grow by 1 per cent at best, in constant currency terms. 

 

“While discretionary budgets are tight, we see strong deal momentum in America, especially in banking, financial services and insurance (BFSI), where demand is strong and steady. Healthcare is also doing well,” he added.

 

BFSI reported negative growth of 3.5 per cent during Q1, while healthcare was up 3.5 per cent. Other sectors, such as consumer, retail and manufacturing, are expected to remain subdued as they are badly affected by tariffs.

 

Palia has been banking on large deals to turn around the fortunes of the company, which has lagged its peers for more than a decade. Wipro won two mega deals in BFSI in the reported quarter, besides 14 large deals.

 

However, such deals — mainly cost optimisation and vendor consolidation programmes — are also slow to ramp up and take time to materialise. In a demand environment that is already subdued, large deals also mean fierce competition among IT services players, which usually erodes margins.

 

Wipro Chief Financial Officer Aparna Iyer agreed that such deals need upfront investment, which does put pressure on operating margins. Margins were up 120 basis points (bps) to 17.3 per cent compared to last year but down 20 bps sequentially.

 

Of the four strategic market units, Americas 1 grew by 5.8 per cent in Q1, while Europe continued to face headwinds and fell by about 12 per cent in constant currency terms.