While the client focus remains on cost efficiency, artificial intelligence (AI)-related investments are gaining traction. Brokerages have raised the EPS estimate for FY25 by 5-7% after a strong margin performance in the December quarter.
The company’s consultancy arm Capco, which it had acquired in March 2021, reported business traction in the December quarter with an 11% year-on-year increase in revenue and a 9% rise in order intake. That indicates a gradual revival in discretionary projects. Capco’s growth also helped Wipro post a modest 0.1% sequential growth in revenue in constant currency (CC) terms compared with the guidance of either a 2% decline or flat revenue.
The American region reported year-on-year improvement in revenue whereas the company continued to face challenges in Europe and the Asia-Pacific, Middle East and Africa (APMEA) market. Revenue from Americas-1, which represents communications, media, software, gaming, healthcare and technology products and related services in the US and the entire Latin American market grew by 3.3%. Americas-2, which includes business from Canada and US businesses from the verticals including banking, financial services and insurance (BFSI), energy, manufacturing and capital markets reported a 0.8% increase in revenue. On the other hand, revenue from Europe and APMEA fell by 4.9% and 8%, respectively, year-on-year.
Despite the salary increase, the operating margin (EBIT margin) expanded sequentially by 70 basis points to 17.5% reflecting higher execution efficiency. The company expects to retain the margin in a tighter band in the coming quarters.
Like larger peers, Wipro showed an uptick in employee attrition, which increased by 80 basis points from the prior quarter to 15.3%, a five-quarter high. The company expects the attrition to soften in the March quarter while it targets to add 10,000-12,000 freshers in FY26.The total contract value (TCV) of new deals was $3.5 billion, similar to the previous quarter. However, the TCV of large deals at $961 million fell below $1 billion for the first time in four quarters, reflecting greater traction in smaller, short-duration projects. The company guided for either a drop of 1% or a rise of 1% in revenue for the March quarter.As a part of the revision to the capital allocation policy, the company will now pay a dividend worth 70% or more of the net profit compared with the earlier proportion of 45-50%. Analysts expect the company to retain the operating margin at around 17.5% on average through FY27 backed by momentum in deal wins and focus on operational efficiency.
