Wipro Q4 Results Preview: Muted show likely once again, all eyes on new CEO’s growth roadmap

Consolidated net profit, though, is likely to rise by nearly 4% sequentially, but decline a sharp 9% YoY to Rs 2,799 crore, the estimates showed.

The Bengaluru-headquartered IT major will release its fourth quarter and annual earnings on April 19.

But more than the earnings, the Street will be all eyes and ears on the new MD and CEO Srini Pallia, seeking to hear about the planned strategy to bring Wipro back on the growth track in the current financial year.

fell sharply earlier this month following the sudden exit of CEO Thierry Delaporte, as this came at a time when the company was struggling to even see industry average growth amid a bleak global environment.

Wipro’s performance under Delaporte has been quite lower than peers over the last two years. However, Delaporte took varied steps to reinvigorate Wipro’s business, and this included simplification of the business structure, hiring more locals, and doing some smart acquisitions such as Capco and Rizing.

Investors would want to know what Pallia plans to do to build over the foundation laid by the erstwhile CEO.

Here is a summary of the Q4 expectations of brokerage firms and the key monitorables for the management.

Nuvama Equities

We expect IT Services revenue to fall 0.5% QoQ in CC and 0.1% QoQ in USD. Margins are likely to be steady QoQ despite a two-month wage hike impact. We expect Wipro to give -1% to +1% CC QoQ revenue growth guidance for Q1FY25. Shall look for an update on consultancy business and improvement in deal execution.

Nirmal Bang Equities

We estimate 0.5% CC QoQ revenue growth in 4QFY24 as against (-)1.5% to 0.5% CC growth guidance. There will be a cross-currency tailwind of ~25 bps.

Our growth number comes on the back of the cautiously optimistic guidance by Wipro, and it is one of the only players to indicate green shoots in discretionary spending (in consulting).

In terms of TCV, Wipro has been delivering $3 billion+ for the last five consecutive quarters with 3QFY24 TCV at a healthy $3.8 billion and we expect TCV to not fall below $3 billion. This also comes on the back of Wipro’s efforts to let go of some small and loss-making accounts and chase larger deals.

The larger issue for Wipro is the conversion of TCV to revenue, which seems to be more acute than its peers. Things to watch out for: (1) When will the conversion of TCV to revenue pick up? (2) Impact of high-profile senior management exits on the business (3) is the recovery in the Consulting piece continuing?

Kotak Institutional Equities

We expect a sequential revenue decline of 0.4% QoQ driven by a weak demand environment. We expect revenues to be at the mid-point of guidance of (1.5)-0.5%. We forecast a stable EBIT margin. The impact of wage revision in the quarter will be offset by the non-recurrence of accelerated amortization in the December 2023 quarter.

We expect muted TCV and ACV numbers given no significant deal announcements.

We expect revenue growth guidance of -0.5 to 1.5% for the June 2024 quarter. We expect investor focus on—(1) reasons for continued senior leadership attrition, (2) reasons for lag in growth rates versus peers and next steps in turnaround, (3) sustenance of green shoots in consulting business (Capco and Rizing), (4) positioning in cost take-out and vendor consolidation deals where Wipro can be vulnerable and (5) margin levers to meet aspirational margin level of 17%+

JM Financial

We expect -0.2% cc revenue growth with a 25bps cross currency tailwind, translating into flat QoQ USD revenue growth for IT Services, resulting in a flat reported USD revenue growth QoQ CC growth will likely be in the upper half of the guided band of -1.5% to 0.5%

Expect EBIT margins to decline 15 bps to 15.9% due to the two-month incremental impact of the wage hike; we expect the cost-efficiency program to largely offset the wage hike impact

We expect Wipro to guide for a 0-2% QoQ cc growth in 1QFY25.

ICICI Securities

We build in 0.3% USD/CC QoQ revenue contraction on account of a slowdown in demand and softness in BFSI demand (Wipro has the highest exposure to BFSI among tier-I at 32.7%). Wipro may also be affected in particular given its high exposure to consulting business (~12-14% of revenue).

We expect the EBIT margin to move up 20 bps QoQ as the wage hike is over in Q3FY24.

We await management commentary on 1) Measures being taken to mitigate risk to the consulting portfolio. 2) AI platform launched in Q4 and collaboration with IIsc on AI; any possible fillip to hi-tech vertical from this. 3) partnership with GE Healthcare.

BNP Paribas

We expect USD services revenue to decline 0.2% q-q (flat q-q CC), above the midpoint of the guidance with some extended furloughs and the continued impact of a slowdown related to a cut in discretionary tech spending. We model 22 bps QoQ expansion in IT services EBIT margin to 16.2% on account of operating efficiencies and cost optimisation. We expect Wipro to guide for quarterly CC revenue growth of -1% to 1% q-q for 1QFY25

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)