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.