AI, Gen AI expected to drive growth in FY25, says Wipro even as clients remain cautious

Wipro continues to witness pricing pressures amid heightened competition in the IT products segment

Information technology services provider Wipro expects growth in financial year 2024-25 on the back of investments made by clients in key areas such as Artificial Intelligence (AI) and Generative AI implementation, among others.

“The IT services industry is expected to accelerate and drive decisions in fiscal year 2025 based on investments made by clients in key areas such as Artificial Intelligence (AI), Generative AI implementation, cost optimisation, operational excellence, digital transformation, vendor consolidation,” the company said in its 20-F filings with the US Securities and Exchange Commission.

The comments from Wipro come at a time when it faces slowing growth and anticipates a revenue decline, due to a tough macroeconomic environment. The company’s revenue guidance stands between (-) 1.5 percent and 0.5 percent for the first quarter ending June 30, 2024.

However, the Bengaluru-based company said businesses have adopted a cautious approach to technology investments, leading to reduced discretionary spending amidst economic uncertainty, high inflation, interest rates, and geopolitical tensions.

India’s fourth-largest IT services company said enterprises continue to prioritise cost takeout and operational excellence initiatives with spending expected to gradually improve in fiscal year 2025.

Clients continue to be soft in the financial services, hi-tech, and telecom sectors, the company said in the report. It added that clients in the consumer goods and manufacturing sector are investing cautiously due to cost “take-outs and weak consumer spending”.

Nonetheless, the healthcare and automotive sectors are bright spots, the company said.

Wipro said enterprises are also prioritising sustainability and resilience, with a growing emphasis on globalising operations to leverage cost advantages, access to talent, and innovation opportunities.

Pricing pressure on IT products

In the IT products segment, Wipro continues to witness pricing pressures amid heightened competition. This division is influenced due to seasonal fluctuations and client spending patterns.

“In our IT Products segment, we continue to experience pricing pressures due to increased competition among IT companies,” Wipro said in the report.

According to a NASSCOM report, the Indian IT services sector is poised for 2% year-over-year growth in fiscal year 2024, as a result of growth in infrastructure management, cloud-based services, and consulting. Similarly, the domestic hardware market in India is projected to reach $18.2 billion in fiscal year 2024, reflecting sustained growth momentum.

Wipro provides IT products as a complement to its IT services offerings rather than selling standalone IT products. The company said its focus continues to be on consulting and digital engagements, with a more selective approach in bidding for system integration engagements.

“Accordingly, our revenue, operating income and profit for our IT Products segment have varied significantly in the past and we expect that they are likely to vary in the future,” Wipro said.

Meanwhile, the company disclosed former Wipro chief executive officer and managing director Thierry Delaporte earned over $20 million (approximately Rs 166 crore) in FY24, which made him the highest-paid CEO in the IT industry for the second year in a row.

Wipro Executive Chairman Rishad Premji’s commission element was withheld from his annual remuneration for the second year in a row in FY24, as the company's incremental consolidated net profit for the year was negative.

Also read: Average Indian CEO pay reaches around Rs 14 crore per year, up 40% from pre-pandemic level