Wipro projects a slightly better second quarter on strong deal pipeline

Business Standard

3 days ago

Wipro reported a 10.9 per cent rise in net profit to Rs 3,330 crore for the first quarter, compared to a year earlier. Sequentially, profit was down 6.7 per cent.
Revenue for the first quarter stood at Rs 22,134.6 crore, marginally up 0.77 per cent year-on-year (YoY). On a quarter-on-quarter (QoQ) basis, revenue declined 1.6 per cent.
The company's Q1 performance marginally beat Bloomberg estimates. According to Bloomberg, revenue was expected at Rs 22,078.3 crore and net profit at Rs 3,249.4 crore.
Revenue from the IT services segment was $2,587.4 million, down 0.3 per cent QoQ and 1.5 per cent YoY. In constant currency terms—excluding the impact of currency fluctuations—IT services revenue declined 2.3 per cent YoY and 2 per cent sequentially. These figures were within the guidance range issued in April, when the company forecast a de-growth of between 1.5 and 3.5 per cent for Q1.
Chief Executive Officer Srini Palia attributed the revenue drop to macroeconomic uncertainty. 'We remain cautious in this environment and the uncertainty continues,' he said on Thursday.
Despite the softness, Wipro reported strong deal bookings of about $5 billion for the quarter ended 30 June, nearly double compared to the same period last year. Large deal bookings—defined as contracts with total value of $30 million or more—rose 131 per cent to $2.66 billion.
The strong pipeline led India's fourth-largest IT services firm to revise its Q2 guidance. Wipro now expects to de-grow 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 BFSI, where demand is strong and steady. Healthcare is also doing well,' Palia said.
"Overall results are mixed bag with lower-than-expected dip in IT Services Sales (down 2% qoq in CC terms vs. EE of 2.6% qoq dip) but with marginally lower than expected EBITM in IT Services at 17.3% vs. our expectations of 17.4%. Reported strong order intake (with two mega deal wins on base of 1 mega deal in 4Q) but despite same IT Services CC growth guidance for 2QFY26E (qoq CC growth guidance of dip of 1% to growth of 1% qoq – in-line with our expectations) is not pleasing (hence, we believe that Wipro's growth in 2H could be better than 1H – await clarity). Announced interim dividend of INR 5/Share," said a note from Equirus Securities.
In Q1, BFSI saw a decline of 3.5 per cent, while healthcare posted a 3.5 per cent increase. Other sectors such as consumer, retail and manufacturing are expected to remain subdued due to the impact of tariffs.
Palia is relying on large deals to revitalise growth at Wipro, which has trailed its peers for over a decade. The company won two mega BFSI deals in Q1, in addition to 14 large deals across verticals.
However, such deals—typically focused on cost optimisation and vendor consolidation—require upfront investments, are slow to ramp up and can squeeze margins in a subdued demand environment.
Chief Financial Officer Aparna Iyer acknowledged the margin pressure. 'These deals need upfront investment,' she said. Operating margin stood at 17.3 per cent, up 120 basis points YoY but down 20 basis points sequentially.
Among Wipro's four strategic market units, Americas 1 grew 5.8 per cent in Q1, while Europe continued to face headwinds, declining about 12 per cent in constant currency terms.