IT services player Wipro on Thursday reported flat revenue and profit growth on year as the company continues to face headwinds in discretionary spending and delays in deal conversations.
The company guided for IT services revenue in the September quarter to be in the range of $2.57 billion to $2.63 billion, translating to sequential growth guidance of negative 1.5% to positive 0.5% in constant currency terms.
“The demand situation in the market has not changed. If I look at our pipeline, it is mostly on cost optimisation and vendor consolidation. Clients are taking the cost out for a lot of investments going into AI. So, the discretionary spend is becoming more intense, and it is also something that we are watching now. That reflects our Q2 guidance,” said Srini Pallia, Chief Executive Officer and Managing Director, during the post-earnings press conference.
For the June quarter, Wipro reported consolidated net profit of Rs 3,352 crore, up 1% year-on-year but down 4.7% sequentially.
Revenue from the IT services business stood at Rs 24,480 crore during the quarter, rising 1% year-on-year but declining 1.4% sequentially in reported currency. In constant currency terms, IT services revenue grew 0.9% year-on-year and fell 1.2% sequentially.
The operating margin for the IT services business fell 130 basis points sequentially and 120 basis points from a year ago to 16%.
Aparna Iyer, Chief Financial Officer, said the margin decline was driven by the impact of salary increases, the ramp-up of large deals won earlier and ongoing investments in AI.
“We remain focused on returning to our previously stated narrow band of 17-17.5% over the next few quarters,” she said.
During the quarter, total bookings stood at $3.37 billion, down 2.4% sequentially in constant currency terms. Large deal bookings came in at $1.63 billion, up 12.9% sequentially, with the company signing 13 large deals.
Geographically, Europe was the strongest-performing market, with revenue rising 6% year-on-year in constant currency terms, although it declined 0.9% sequentially. APMEA (Asia Pacific, Middle East and Africa) grew 13.5% year-on-year and 4.4% quarter-on-quarter. In contrast, Americas I remained flat on-year and fell 2.3% sequentially, while Americas II declined 7.3% year-on-year and 2.5% sequentially.
Pallia said the company is seeing momentum build in the BFSI sector in the US, while Europe continues to see healthy demand in markets such as the UK and Nordics. However, he added that the energy, manufacturing and resources segment in Europe "remains soft", even as the company continues to see a healthy pipeline across the region.
Headcount increased by 888 during the quarter to 243,044 employees, while voluntary attrition over the trailing 12 months stood at 13.9%, compared with 13.8% in the previous quarter.
The company declared an interim dividend of Rs 2 per equity share.
