Wipro Q4 Results Preview: Weak Demand Likely To Drag Revenue Sequentially, EBIT Margins Seen Stable

Azim Premji-backed IT giant, Wipro shares will be in focus on April 19 ahead of its Q4 results for FY24 later in the day. Wipro's peers Infosys and TCS have announced their earnings and both the tech biggies have outperformed in terms of profitability. Meanwhile, in Q4, Wipro is expected to report a slight decline in revenue, while its deal wins are likely to be subdued. Further, the wage revision impact on Wipro is likely to be offset by the non-recurrence of accelerated amortization.

Ahead of Q4 results, Wipro's share price ended at Rs 444.30 apiece, down by 1% on BSE after market hours of April 18. Its market cap stood at Rs 2,32,154.86 crore.

In Q3FY24, Wipro registered a consolidated net profit, attributable to owners, to Rs 2,694.2 crore, down by 11.75% YoY but up by 1.81% QoQ. Meanwhile, rupee revenue came in at Rs 22,205.1 crore in Q3FY24, registering a drop of 4.41% YoY and 1.38% QoQ. In constant currency, the IT Services segment revenue decreased by 1.7% QoQ.

While for Q4FY24, Wipro estimates revenue from its IT services business segment to be in the range of $2,615 million to $2,669 million. This translates to sequential guidance of -1.5% to +0.5% in constant currency terms.

Here's what experts forecast for Wipro's Q4 Earnings:

Kotak Institutional Equities On Wipro:

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 investors to focus on (1) reasons for continued senior leadership attrition, (2) reasons for the lag in growth rates versus peers and next steps in turnaround, (3) sustenance of green shoots in the 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%+.

Dolat Capital On Wipro:

Expect revenue de-growth of 0.6% in CC terms QoQ (Qtrly guidance of -1.5% to +0.5%) due to softness in consulting & Hi-tech spend. OPM for IT Services to contract by 29bps QoQ due to wage hike impact (2month). Key Monitorable: 1) Expect Q1 revenue growth of 0% to +2%, 2) Commentary on the outlook of large deal pipeline & leadership exits.

Nirmal Bang On Wipro:

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 ~25bps. 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 US$3bn+ for the last five consecutive quarters with 3QFY24 TCV at a healthy US$3.8bn and we expect TCV to not fall below US$3bn. 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?