Wipro Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Wipro Ltd (WIPRO) Q2 FY24 Earnings Concall

• Strong Deal Wins And Order Bookings
  • Closed large deals worth $1.3 billion in TCV, highest in last 9 quarters and 79% YoY growth.
  • Booked 14 deals over $30 million in TCV vs 10 last quarter.
  • Total bookings TCV at $3.8 billion, up 6% YoY.
  • Won 2 near $500 million deals from existing large accounts.
  • Winning more large deals now than before, but conversion to revenue is taking more time due to lower discretionary spending by clients.
• Impact Of Macroeconomic Environment
  • Business environment uncertain with high inflation and interest rates.
  • Clients focused on efficiency, existing investment optimization, faster ROI.
  • Seeing lower discretionary spending and slower order book conversion.
  • Revenue declined 2% QoQ in constant currency terms, while margins held steady at 16.1% in 1H24 vs 16% in 1H23.
• Wipro’s AI Strategy Progress
  • Rolled out Gen AI training to 180,000 employees on basics.
  • Integrating Gen AI into solutions and offerings across functions.
  • Seeing early promising results in HR, QA testing, data generation.
  • Seeing rapid adoption in healthcare, consumer, financial services sectors.
  • Demand for Wipro’s Gen AI services expected to increase greatly.
• Margin Outlook
  • Ongoing transformation driving margin resilience.
  • Initiatives around delivery excellence and operational efficiency.
  • Talent utilization increased 80 bps QoQ to 84.5%.
  • Margins expected to remain steady in guided range.
• Strategy Of Exiting Smaller Accounts
  • WIPRO started exiting smaller accounts in 2020 to focus on developing large accounts.
  • Focus is on meaningful partnerships and transformation opportunities with fewer, larger accounts.
  • Doubled the number of accounts over $100 million from 11 to 22 in 2 years.
  • Top 80 accounts have resisted slowing growth better than smaller accounts.
• Increase In Sales And Marketing Expenses
  • The increase in S&M expense in 2Q is due to accelerated amortization related to a customer intangible.
  • This caused a one-time increase in depreciation and amortization expense.
  • Sales and marketing expenses should normalize over time
• Guidance And Outlook
  • Wipro expects things to improve in the next couple of quarters.
  • Expects lower furloughs compared to previous year.
  • More strategic deals focused on key areas like cloud, data, and security.
• Wage Hikes
  • Acknowledge margin pressure from wage hikes and seasonal impacts.
  • Taking measures to remain resilient but Q3 will be challenging.
  • Endeavor to keep margins range-bound compared to previous quarters.
• Financial Services Performance
  • Revenue from financial services sector has slowed significantly this year across geographies.
  • Tier 2 banks in the US are starting to see growth pick up again.
  • Banks are focusing on cost takeout and consolidation, which Wipro sees as an opportunity.
  • Wipro remains confident about pipeline and growth prospects in financial services, especially in Europe.
• Europe Business
  • Europe revenue saw a surprising decline in 2Q, primarily driven by slowdown in financial services and manufacturing accounts.
  • Pipeline continues to be strong in Europe, leadership team is bullish about growth prospects.
  • No major client losses reported in Europe.