Wipro Q1 Earnings Preview: Macro issues to play spoilsport again; new deals a breather

Analysts will be closely monitoring Wipro's commentary on several key aspects such as the new management's strategic initiatives in AI and consulting.

Wipro is set to announce its Q1 FY25 earnings on July 19, with analysts divided between expecting a slight decline due to macroeconomic challenges and softness in certain verticals, and anticipating modest growth driven by new deals and operational efficiencies.

According to the average of nine estimates compiled by Moneycontrol, Wipro's consolidated net profit for the quarter ended June is expected to rise over four percent QoQ to Rs 2,953 crore, while revenue from operations is likely to remain flat.

Wipro Q1 FY25 Preview

"We expect flattish revenues for the quarter. Revenues will be above the midpoint of guidance of (-)1.5 - 0.5 percent. We attribute relatively strong performance to strength in CAPCO and likely recovery in Americas market," said Kotak Institutional Equities.

Wipro's EBIT margin for the June quarter is expected to decline by 20 basis points (bps) QoQ to 16.2 percent. "Recurring IT services EBIT margins are expected to remain largely flat despite seasonal softness in 1Q margins due to investment lead by ongoing cost optimisation," Equirus Capital said.

What factors are driving the earnings?

1. New Deal Ramp-Ups: Axis Securities expects a 0.9 percent QoQ revenue growth, primarily fueled by the ramp-up of new deals.

Wipro Q1 FY25 Brokerage Estimates

2. Operational Efficiencies: InCred Equities notes that operational efficiencies could help offset increased SG&A expenses (Selling, General, and Administrative), following significant reductions in the previous quarter. This efficiency drive is likely to stabilize margins, despite the revenue pressures.

3. Vertical Performance: The company is expected to see a continued softness in key verticals such as retail and communications led by cautious client spending behaviour, according to Motilal Oswal.

Also Read | TCS vs Wipro: Who'll win the AI platform war?

What to look out for in the quarterly show?

Analysts will be closely monitoring Wipro's commentary on several key aspects such as the new management's strategic initiatives in AI and consulting, and signs of recovery in verticals like BFSI and healthcare. Investors will be keen on updates regarding deal TCV/pipeline, pricing scenarios, and the ramp-up of new deals.

Anand Rathi expects significant insights into BFSI growth and a potential revival in the Hi-Tech sector. Axis Securities focuses on the outlook for key verticals like manufacturing and retail. BNP Paribas will look for updates on discretionary demand and macro headwinds, while Emkay anticipates detailed discussions on IT budgets, demand trends, and consulting business outlook.

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