Wipro posts upbeat Q2 guidance at 3-5%; Q1 net profit down 21%

Wipro Ltd expects revenue for the quarter ended September to be in the range of $2.81-2.87 billion, translating to a sequential growth of 3-5%, faster than the 1-3% it had forecast for the June quarter.

Unlike Infosys, which provides annual forecasts, Wipro typically guides for the quarter ahead.

The upbeat guidance is keeping in mind the robust deal pipeline and performance in sales, Thierry Delaporte, chief executive officer and managing director of Wipro, told reporters in Bengaluru.

The company’s net profit for the June quarter declined 20.7% to ₹2,563 crore from ₹3,232 crore in the year-ago period because of a higher base on account of competitive tax rates in the previous year as well as a lower other income in the first quarter. The company’s profit missed Bloomberg’s consensus estimate of ₹3,048 crore.

The revenue for the June quarter grew 19% annually to ₹21,529 crore on the back of a strong demand environment for cloud, digital engineering, and cyber security services. Revenue was in line with Bloomberg estimates of ₹21,485 crore.

Revenue in dollar terms grew 2.1% sequentially in constant currency to $2.74 billion on the back of some large deal wins as well as expansion in smaller deals.

“Our order bookings grew 32% from a year earlier in total contract value terms, powered by large transformational deals, and our pipeline today is at an all-time high. We continue to reinforce the investments that allow us to grow our business, remain agile in the market and efficient as an organization while staying focused on serving our clients even better,” Delaporte said.

Operating margin narrowed to 15% in the June quarter from 18.8% a year ago and 17% in the preceding three months due to investments in various capabilities.

On a trailing 12-month basis, the voluntary attrition rate for the June quarter rose to 23.3% from 15.5% a year ago, indicating demand for tech talent continues to outpace supply, a trend seen across the industry. However, it moderated from 23.8% in the March quarter.

Wipro net added about 15,000 employees, including 10,000 freshers, during the June quarter taking its employee headcount to 258,574 as of 30 June.

As part of his efforts to turn around the company, Delaporte has been executing a five-point strategy he had laid out soon after joining the company. The strategy involves accelerating growth through prioritisation 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 January last year, Wipro reorganised its IT services segment into four strategic market units, all of which, projected strong growth. On an annual basis, while Americas 1 and Americas 2 grew 19.6% and 17.4% respectively, Europe grew 15.6% in constant currency and Asia Pacific Middle East Africa (APMEA) region grew 15.1%.

The two global business lines – iDEAS (Integrated Digital, Engineering & Application Services) grew 21.2% while iCORE (Cloud Infrastructure, Digital Operations, Risk & Enterprise Cyber Security Services) grew 11.1% year-on-year in constant currency.

"Wipro has a healthy pipeline and has managed to tap the opportunities in the market well. It can combine its strong automation capabilities, products, and services well to leverage the current situation. Wipro needs to focus on attrition rates and client experience to maintain its growth momentum and its operating model changes are in line with those requirements,” said D.D. Mishra, senior director analyst, Gartner.