Wipro Limited Q3 FY24 Earnings Conference Call Insights

Key highlights from Wipro Limited (WIPRO) Q3 FY24 Earnings Concall

• Financial Performance
  • IT services revenue at top end of guidance at $2.66 billion.
  • Booked $3.8 billion in total contract value (TCV).
  • $900 million plus in large deal TCV, up 20% YTD.
  • Net income margin expanded 180 bps sequentially to 16%.
  • Operating margin remained resilient at 16% despite headwinds.
  • Highest operating cash flow in 5 quarters at 177% of net income
• Demand Environment
  • Overall demand remains cautious.
  • Clients focused on returns on investment and optimization.
  • Consulting showing signs of bounce back with double digit order bookings growth at Capco.
• Americas/ Europe Performance
  • Americas 1 saw 2% sequential growth led by 9% in healthcare.
  • Americas 2 saw 1.3% revenue decline but 46% increase in order bookings TCV.
  • Won 4 large deals totaling about $300 million despite economic weakness in Europe.
  • Revenue decreased 4.3% sequentially.
• APMEA Performance
  • Revenue declined 5.4% from reducing low margin accounts.
  • Margins rose 240 bps sequentially to 13.8%, highest in 6 quarters.
  • Consulting playing big role in complex deals.
• Operations Streamlining
  • Leveraging AI/automation for efficiency across functions.
  • Optimizing talent pyramid to better serve clients.
  • Multiple initiatives underway to develop and reskill talent.
  • Leveraging capabilities from acquired firms.
  • Changes to Growth Office reinforce large deal nurturing.
• People Investment
  • Completed annual salary increases and promotion cycle.
  • Focus on training, development, and growth opportunities.
  • Will hire for specific skills as needed but no major additions yet.
  • As demand rebounds over coming quarters, more significant hiring expected.
• Leveraging AI
  • AI moving from experimentation to vital business strategy.
  • AI embedded across existing solutions and new offerings.
  • Using GenAI in digital workplace, engineering, and healthcare.
  • Expanding partnerships with NVIDIA and IBM on AI.
  • 210K employees trained on AI, learning pathways rolled out.
  • Accelerating GenAI adoption internally across HR, marketing, finance etc.
• Guidance
  • Revenue guidance of -1.5% to +0.5% QoQ growth in constant currency.
  • Expect margins to remain range-bound with improvements in coming quarters.
  • Guidance shows cautious optimism despite solid Q3 performance.
  • Growth will enable some margin expansion but investments needed for the future.
  • Areas like AI and people will require ongoing investment amidst expansion.
• Transformation Programs
  • Leveraging 4 global business units for talent and solutions.
  • Governance through program management and leadership focus.
  • Restructuring low-margin businesses through multi-pronged actions.
  • Optimizing costs and organizational design for agility.
  • Heading towards more AI-based automation internally.
• Market Outlook
  • Seeing some positive signs like stabilization and increased discretionary spending, but remains cautiously optimistic.
  • Hard to predict 2023 budget priorities yet, but consulting rebound signals improving market.
  • Uncertainty still remains compared to pre-slowdown tech spending.
• Capco Performance
  • Double-digit order bookings growth signals consulting rebound, specifically in financial services.
  • Broad-based growth across BFSI clients.
  • Consulting pull-through effect means downstream revenue likely 5-6x consulting fees.
  • Capco rapidly growing previously, then exposed in recent tech spending slowdown.
  • Signs of turnaround for Capco mirror potential wider stabilization.
• Consulting Rebound
  • Discretionary spending showing signs of bottoming out and slight recovery.
  • Recent sales performance and large deal wins should drive future growth.
  • Leakages seem to be reducing with incoming revenue exceeding cancellations.
• Performance by Vertical
  • WIT seeing ENU as a reasonably good market with significant investments.
  • Expecting to see growth in ENU for Wipro going forward.
  • In Manufacturing, performance has been mixed recently but potential in areas like automotive.
  • The company has big ambitions for manufacturing and wants to invest more.