Wipro Q2 2024 Results: Operating Performance Enhances, But Lower Guidance Disappoints Investors

Actual vs. expectations

Revenue inline with expectations while overall margins and IT Services EBITM above our estimates.

Likely stock reaction

Neutral

Key positives – Operating performance beat, broad-based growth recovery, strength in top client (3.9% QoQ)

Result Summary

• Wipro reported revenues of USD2.66bn, +1.4%/-1.9% QoQ/YoY (CC 0.6% QoQ; closer to the upper end of the guidance), tad better than our expectations. (Q2FY25 revenues – TCS: US$7.67bn, +1.1% CC QoQ; HCLT: US$3.45bn, +1.6% QoQ).
• Reported EBITM expanded 30bps QoQ to 16.7%, above our expectations of 16.4%.
• IT services EBITM expanded ~30bps QoQ to 16.8%, above our expectations of 16.5%. (TCS IT EBITM fell by 60bps QoQ to 24.1%; HCLT EBITM expanded 150bps QoQ to 18.6%).
• Reported profits at Rs32.1bn (6.8% QoQ, 21.3% YoY), above our estimates of Rs30.3bn.
• Guidance: IT services revenue is expected to be in the range of -2% to +0% QoQ CC in Q3FY25 (below our expectations of -1% to +1%).
• The company has signed large deals with TCV of US1.5$bn in Q2. Overall order booking were US$3.6bn in Q2 (book-to-bill of ~1.3x), down 5.9% CC YoY.
• The board has approved issue of 1:1 bonus shares.

Growth by Verticals (all in CC terms)

• Financial Services: 2.7% QoQ
• Manufacturing: -2.0% QoQ
• Healthcare: -0.5% QoQ
• Communications: 1.6% QoQ
• Energy: -3.7% QoQ
• Consumer Business Unit: 0.3% QoQ
• Technology: 1.6% QoQ

Growth by Strategic market units (all in CC terms)

• Americas 1: 1.2% QoQ
• Americas 2: 0.8% QoQ
• Europe: -0.1% QoQ
• APMEA: 0.3% QoQ

Manpower details

Total Headcount:233,889, +0.4% QoQ/-4.4% YoY

TTM Attrition (IT services excl. DOP): 14.5%, V/s 14.1% in Jun’24

Con call at 7:00pm IST today