Wipro revenue rises 13%, profit takes hit

BENGALURU: Wipro‘s September quarter performance was a mixed bag. Revenue beat street estimates, but margins were a miss. Profitability has been under pressure for some time now, partly because of higher employee costs.
The results were announced after the stock market closed in India, but on the NYSE, shares were down by over 3% in morning trade.
Revenue stood at $2.8 billion. In constant currency, revenue rose 4.1% sequentially and 12.9% year-on-year. The corresponding numbers for TCS, which announced results on Tuesday, were 4% and 15.4%.
Wipro CEO & MD Thierry Delaporte said there is a change in the level of optimism among clients, as businesses around the world are dealing with inflationary pressures, geopolitical turmoil, energy crises, and rising interest rates. “Almost every major economy is experiencing economic deceleration,” he said.
Wipro expects its IT services business to be in the range of $2.8-2.9 billion in Q3, translating to a sequential growth of 0.5% to 2%, and an year-on-year growth of 10.1% to 11.8%. It’s a seasonally weak quarter, marked by the holiday season and furloughs.
“For the full year, we are certain that we will report double-digit growth,” Delaporte said. He said bookings in the last quarter were robust. Wipro signed 11 deals with a total contract value (TCV) of $725 million, a 24% growth year-on-year. It had clocked $1 billion in TCV in the preceding quarter. Delaporte said large deal bookings rose 42% year-on-year in the first half of the fiscal. “Our pipeline has a well-balanced mix of transformation, growth, and cost-takeout engagements,” he said.
Operating margin inched up 16 basis points (100bps = 1 percentage point) sequentially to 15.1%. A year ago, it was 17.8%. Net income was up 4% sequentially, but dropped 9% year-on-year due to higher interest expenses.
Delaporte noted that a quarter ago the company had communicated that 15% was the bottom for margins, and it would improve from there. “I think we will follow this trendline,” he said.
CFO Jatin Dalal said three positive levers were at play, including an improvement in selling, general and administrative expenses, operational improvement, and forex benefits.

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