Wipro Q1 earnings Preview: Sequential downturn expected across major financial metrics

The company is expected to report a revenue of Rs 23,014 crore in Q1FY24.

Wipro, the fourth largest Indian player in the global IT services arena, is expected to report a dull quarter with a sequential decline in all major financial metrics.

The company is expected to report a revenue of Rs 23,014 crore in Q1FY24 according to an average of the estimates of Motilal Oswal, Kotak Institutional Equities, ICICI Securities, HDFC Securities and Jefferies.

This is supposed to be a 1.1 percent decline QoQ (quarter-on-quarter) or a 6.4 percent increase YoY (year-on-year), meeting the revenue guidance of 1-3 percent decline set by the company at the beginning of this quarter.

According to a mean consensus of the above-mentioned brokerage firms, the company is also expected to register a decline in its profits. The net profit estimate for Q1FY24 is Rs 2,976 crore which is a 2.6 percent decline QoQ against Rs 3,094 crore reported in the corresponding quarter. It is however a 16.8 percent increase in YoY terms.

The mean Earnings Before Interest and Tax (EBIT) margin in Q1FY24 is forecasted to be 15.7 percent, a 20 basis points decrease sequentially but a 120 basis points increase YoY, according to the brokerage firms.

The dollar revenues for the April to June quarter are expected to be around $2777 million, a 1.6 percent decline sequentially but a 1.5 percent growth YoY.

The BFSI (banking, financial services and insurance) and consulting segment have witnessed demand contraction due to business entities prioritising large deals with the IT companies and recession fears in the North American region. Analysts have observed that a high amount of exposure to the same will pressure Wipro's earnings as well as margins.

With the clients of the Indian IT majors going soft on discretionary spending, prospects of an improvement in revenue numbers and margins for Wipro which lacks a strong deal pipeline is expected to remain weak even in the ongoing quarter.

"Since there are no mega deal announcements and no signs of incremental demand pick-up in Wipro’s key banking and retail verticals that have been its primary growth drivers in the past, we expect muted 0-2% QoQ CC revenue growth guidance for Q2FY24E." ICICI Securities noted.