Categories Concall Highlights, Earnings, Technology

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.

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