Wipro outlines weak Q1 after a dismal year
NEW DELHI:
Wipro Ltd on Friday outlined bleak revenue growth for the June quarter, as India’s third largest IT services company exited one of its worst years with declining revenue, profit and headcount. The Bengaluru-based company posted a 3.8% decline in revenue and 9.5% drop in net employee count in FY24, the highest among its peers. After a flat March quarter, Wipro now expects revenue for the June quarter fall by 1.5%, or grow 0.5% at best.
Net revenue for FY24 came in at $10.8 billion, against $11.2 billion a year ago. For the March quarter, revenue rose a mere 0.1% sequentially, at $2.66 billion. Profit in Q4 increased 5.2% sequentially to $341 million, but fell 2.7% to $1.33 billion for the full year.
More than a fifth of Wipro’s net revenue is driven by its top 10 clients, including the likes of Microsoft Corp. and Amazon.com, Inc.
Srinivas Pallia, who took over as CEO after Thierry Delaporte resigned on 6 April, offered revenue guidance of -1.5% to 0.5% in constant currency for the June quarter, retaining its guidance for the March quarter. Constant currency does not take periodic currency fluctuations into account.
Performance slightly exceeded analyst expectations for both the quarter and the fiscal year. A Bloomberg poll of 42 analysts had expected Wipro to report net revenue of $10.74 billion and net profit of $1.32 billion. A second poll of 28 analysts had expected March quarter revenue of $2.66 billion and net profit of $332 million.
However, the quarterly performance follows a weak overall year for Wipro. Since October 2020, Wipro has won only one mega deal, valued at $700 million. Lack of such large deals is a cause for concern, since they typically represent a higher level of confidence in a service provider among clients. In February, reports claimed that Wipro’s deal with chipmaker Intel Foundry was likely valued at nearly $1 billion, but neither Wipro nor Intel Foundry has confirmed this.
Both of Wipro’s larger rivals have posted better earnings. Tata Consultancy Services (TCS), India’s top IT services firm, posted a 4.1% revenue growth and 7.7% rise in net profit for FY24. Infosys fared weaker, but managed to post 1.9% revenue growth and a 6.2% rise in net profit for the year.
Headcount has fallen at all three. In FY24, Wipro’s headcount fell by 9.5% to 234,054 employees. With this, TCS, Infosys and Wipro have cumulatively reported a decline of nearly 64,000 employees through FY24, the biggest annual decline in 25 years for India’s IT services sector.
On Friday, Pallia expressed a cautious approach. “The next few months will be crucial as we steer the company for growth. As a passionate hiker, I deeply connect with these words of Junko Tabei (the first woman to scale Mount Everest). ‘Even if it is hard, you can reach the peak if you climb step by step’,” the top executive said.