Wipro is set to announce its financial results for the first quarter of FY25 on July 19. With an 8 per cent year-on-year (YoY) profit decline in Q4FY24, at ₹2,835 crore, analysts predict Wipro’s revenue could be flat quarter-on-quarter (QoQ). Here are five key considerations:
Vertical growth
A Motilal Oswal report attributes Wipro’s revenue degrowth to the macro impact and continued softness in verticals. “The IT services’ margin is expected to be range-bound and could see a marginal dip. We expect continued softness in key verticals like retail and communications, led by cautious client spending behaviour,” read the report, adding that recovery in the consulting business and strategic initiatives from the new management will be the key areas to watch out for.
Revenue growth
While some brokerages like Prabhudas Lilladher and Motilal Oswal expect the firm to report a revenue decline of -0.5 per cent QoQ, others anticipate a boost of 0.9-2.2 per cent in rupee terms. A poll of brokerages pegs revenue for Q1FY25 at ₹22,040-22,400 crore, with no clarity on whether it will increase or decrease from the previous quarter’s revenue of ₹22,208.3 crore.
Margins and guidance
Axis Securities reports that Wipro’s operating margins may expand due to lower onsite expenses. Brokerages expect no change in earnings before interest and tax (EBIT) margins at 15.8-16.5 per cent, from 16.4 per cent in the previous quarter. A BNP Paribas report indicated a 14 basis points (bps) QoQ expansion in EBIT margin on account of operating efficiencies and cost optimisation.
“Margin recovery would be muted due to missing growth elements and ramp-up of the large deal. We expect the company to improve Q2 mid-range guidance by 50 bps vs Q1’s last quarter,” read the Prabhudas Lilladher report. In Q4, the guidance was -1.5 per cent to 0.5 per cent.
Deals and conversions
In Q4FY24, total bookings stood at $3.6 billion while large deal bookings stood at $1.2 billion. Earlier in the quarter, Wipro bagged a $500-million contract with a US communication service provider, making it its first big win under new CEO Srini Pallia. Several brokerages have reported that Wipro’s large deal wins and pipelines are worth keeping an eye on. BNP Paribas says, “we expect revenue to grow 2.2% q-q CC helped by new deal ramp-ups.”
Attrition and hiring
In Q4FY24, Wipro reported a headcount of 2,34,054, a loss of 15,704 employees since Q1FY24. In Q4, attrition remained unchanged from the previous quarter at 14.2 per cent. Hiring plans in the first quarter of the new fiscal will be monitored closely.
“A weak exit to FY24 and a poor 1QFY25 outlook will keep Wipro’s revenue growth underperformance elevated relative to its larger peers. Disciplined cost optimisation-led margin expansion and strong operating cash flow (OCF) generation are encouraging. The company’s strategy of exiting smaller accounts, while well-intentioned, appears to be mistimed given the macroeconomic pressures. We see risks to Wipro’s earnings growth and valuation,” noted BNP Paribas in the report.