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01/11 03:21
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Wipro's earnings call shows positive indicators: strong deal bookings, optimistic sector outlooks, and a focus on AI and modernization. Despite margin pressures, management expects improvements and maintains a solid guidance range. The Q&A section highlights client cost optimization and reinvestment in AI, with no significant headwinds apart from seasonality. The positive momentum in BFSI and healthcare, along with a robust pipeline, supports a positive sentiment. Although some responses lacked specificity, the overall outlook and strategic initiatives suggest a stock price increase of 2% to 8%.
IT services revenue $2.6 billion with sequential growth of 0.3% in constant currency. Year-over-year, revenue declined 2.6% in constant currency terms. The decline was attributed to market conditions and client-specific challenges.
Adjusted operating margin 17.2%, an improvement of 0.4% compared to the same period last year. The improvement was due to operational efficiencies, though it was impacted by a one-off charge related to a client bankruptcy event.
Operating margins 16.7%, contracted 60 basis points quarter-on-quarter and 10 basis points year-on-year. The contraction was due to the one-off charge from a client bankruptcy event.
Americas 1 revenue Grew 0.5% sequentially and 5% year-on-year, driven by strong performance in healthcare, technology, and communications sectors.
Americas 2 revenue Declined 2% sequentially and 5% year-on-year, attributed to market-specific challenges.
Europe revenue Grew 1.4% sequentially but declined 10.2% year-on-year, reflecting challenges in the region despite sequential recovery.
APMEA revenue Grew 3.1% sequentially and 2.6% year-on-year, driven by strong results in India, Australia, and Southeast Asia.
BFSI sector revenue Grew 2.2% sequentially but declined 4% year-on-year, with clients focusing on cost optimization, vendor consolidation, and legacy modernization.
Healthcare sector revenue Declined 0.2% sequentially but grew 3.9% year-on-year, supported by structural changes in the U.S. healthcare market.
Consumer sector revenue Declined 1.7% sequentially and 7.4% year-on-year, impacted by tariff uncertainties and supply chain reevaluations.
Technology and Communication sector revenue Grew 0.8% sequentially but declined 1.7% year-on-year, with a focus on AI adoption and cost optimization.
EMR sector revenue Declined 1.5% sequentially and 0.5% year-on-year, reflecting sector-specific challenges.
Capco revenue Grew 3.2% year-on-year, driven by momentum in newer markets like LatAm and APMEA.
Net income and EPS Grew 1% year-on-year, reflecting stable profitability.
Operating cash flows 104% of net income for Q2, indicating strong cash generation.
Gross cash including investments $6 billion for the quarter, showcasing a strong liquidity position.
Net other income Declined 14% year-on-year, attributed to lower yields on investments.
Accounting yield for average investments in India 7.1%, reflecting the return on investments.
Effective Tax Rate (ETR) 23.8% for Q2 FY '26, compared to 24.6% in the same quarter last year, indicating a slight reduction in tax burden.
Wipro Intelligence: A unified suite of AI-powered platforms, solutions, and transformative offerings. It includes advanced capabilities across delivery and industry platforms, with over 200 AI agents and platforms spanning multiple sectors. Examples include AutoCortex for automotive, WealthAI for BFSI, and payer AI for healthcare.
Market Performance: Americas 1 showed sequential and year-on-year growth driven by healthcare, technology, and communications. Europe returned to sequential growth after several quarters, led by BFSI. APMEA growth was strong in India, Australia, and Southeast Asia. CAPCO expanded in LatAm and APMEA.
Strategic Partnerships: Formed a multiyear partnership with a leading U.K. financial company to modernize their business using AI and digital tools. Partnered with a European distribution and logistics company for a multiyear transformation of operations and IT.
Financial Performance: IT services revenue stood at $2.6 billion with sequential growth of 0.3% in constant currency. Adjusted operating margin was 17.2%, an improvement of 0.4% year-on-year. Operating cash flows were 104% of net income.
Deal Wins: Closed $4.7 billion in total contract value, including 13 large deals and 2 mega deals in healthcare and BFSI. Focused on vendor consolidations, AI-powered transformations, and consulting-led programs.
AI and Digital Transformation: Launched Wipro Intelligence to enable clients to scale in an AI-first world. Focused on AI adoption, cost optimization, and industry-specific solutions.
Americas 2 performance: Decline in revenue this quarter, with a 2% sequential and 5% year-on-year drop, indicating challenges in maintaining growth in this region.
Tariff uncertainties: Impacting consumer, energy, and manufacturing sectors, leading to reevaluation of supply chains and potential disruptions.
Healthcare sector structural changes: Ongoing structural changes in the U.S. healthcare sector may pose challenges despite being a strong performer.
Operating margin pressure: Margins contracted 60 basis points quarter-on-quarter due to a one-off charge from a client bankruptcy event and ongoing investments for growth.
Europe market performance: Despite sequential growth, Europe experienced a 10.2% year-on-year revenue decline, highlighting challenges in this market.
Consumer sector performance: Declined 1.7% sequentially and 7.4% year-on-year, indicating weak performance and potential risks in this sector.
Economic uncertainties: General economic uncertainties and risks associated with forward-looking statements as highlighted in the SEC filings.
Future IT Services Revenue Growth: In quarter 3, Wipro projects sequential IT services revenue growth of minus 0.5% to plus 1.5% in constant currency.
Revenue Guidance: Revenues from IT services business are expected to be in the range of $2.59 billion to $2.64 billion for Q3 FY '26.
Operational Focus: The company aims to convert its strong backlog into revenue while maintaining operational discipline to ensure profitable growth.
Market Growth Expectations: Future growth in Americas 2 is anticipated as deals won in the first half begin to ramp up. Europe is expected to gain momentum with the Phoenix deal generating revenue from Q3.
AI and Digital Transformation: Wipro Intelligence, a unified suite of AI-powered platforms, is expected to drive innovation and measurable outcomes for clients, supporting their transition to an AI-first world.
Sector-Specific Trends: Momentum in BFSI is expected to continue with a focus on cost optimization, vendor consolidation, and AI deployment. Healthcare in the U.S. is undergoing structural changes, presenting opportunities for growth.
Strategic Partnerships: Wipro has formed multiyear partnerships with a leading U.K. financial company and a European logistics company, focusing on AI-driven modernization and operational efficiency.
Acquisition Impact: The Harman Digital Transformation Solutions acquisition is expected to close in Q3, but its revenues are not factored into the guidance.
The selected topic was not discussed during the call.
Wipro's earnings call highlights strong deal bookings, especially in AI and modernization, and a robust pipeline despite macro challenges. The Q&A reveals confidence in AI strategy, operational improvements, and resilience against visa changes. Concerns like discretionary spending shifts and net profit decline are offset by positive sector-specific demand and strategic focus. The positive outlook for Europe, minimal H-1B impact, and focus on AI-skilled workforce support a positive sentiment. However, the lack of clarity on wage hikes and public sector focus tempers the outlook slightly, resulting in an overall positive sentiment prediction.
Wipro's earnings call shows positive indicators: strong deal bookings, optimistic sector outlooks, and a focus on AI and modernization. Despite margin pressures, management expects improvements and maintains a solid guidance range. The Q&A section highlights client cost optimization and reinvestment in AI, with no significant headwinds apart from seasonality. The positive momentum in BFSI and healthcare, along with a robust pipeline, supports a positive sentiment. Although some responses lacked specificity, the overall outlook and strategic initiatives suggest a stock price increase of 2% to 8%.
The earnings call reveals mixed signals: positive net income and EPS growth, strong free cash flow, and a growing pipeline of large deals. However, revenue declines in key sectors and weak discretionary spending pose concerns. The Q&A highlights uncertainties in margins and ACV growth, with management avoiding specific guidance. The market may react cautiously, given the sequential revenue decline guidance and margin pressures. Overall, a neutral stock price movement is expected over the next two weeks.
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