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.