Wipro Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Revenue at top end, but still declining: IT services revenue fell 1.7% QoQ in constant currency, landing at the top of the guided range, while the Q4 guide implies another sequential decline of up to 1.5%.
• Margins expand despite headwinds: Operating margin rose 180 bps sequentially to 16%, absorbing seasonal furloughs and salary increases, a result management attributes to structural efficiency actions taken over several quarters.
• Order book shows volume, not yet growth: Total bookings reached \$3.8 bn, with large deal TCV up 20% year-to-date, but the mix remains tilted toward efficiency and cost-optimization work rather than discretionary expansion.
• Consulting is the early signal: Capco delivered its highest order bookings in three quarters, reinforcing management's thesis that consulting will be the first to bounce back when the demand environment turns.
• What to watch next quarter: Whether the "green shoots" in discretionary spend materialize into revenue as client budgets firm up through January and February, and whether the margin resilience holds if growth stays negative.

Demand Environment

• Cautious clients, efficiency-first spend: The demand environment remains cautious, with clients making conservative investments focused on efficiency, ROI, and optimization of existing investments rather than new discretionary programs.
• Discretionary drag persists: Growth was hurt by a decline in smaller, high-volume discretionary projects. Sales performance and large deal volumes have remained healthy, but the discretionary slowdown has prevented that pipeline from converting into revenue growth.
• Green shoots, not a turn: Management sees "a certain form of stabilization and some pickup in discretionary spend," but is cautiously optimistic because January and February are when client budget priorities typically become clearer.
• Vertical divergence: Healthcare grew 9% sequentially within Americas 1, while BFSI and energy/utilities in Americas 2 remained soft. Europe won four large transformative deals but revenue still fell 4.3% sequentially, and APMEA declined 5.4% as the unit deliberately shed low-margin accounts.

Delaporte: "The market has not fundamentally changed in the last weeks. What we are seeing is, I would say, we are seeing green shoots. We are seeing a certain form of stabilization and, in some ways, some pickup in discretionary spend."

Margins & Operational Efficiency

• Resilience by design: The 180 bps sequential margin expansion to 16% was achieved despite seasonal furloughs and annual salary increases effective December 1. Management framed this as proof that multi-quarter investments in people, processes, and organizational efficiency have built structural margin resilience.
• Levers deployed: The margin outcome was driven by maximizing revenue performance, realizing savings from structural improvements in pyramids and fixed-price productivity, and reducing operating costs across all units and geographies.
• APMEA restructuring payoff: APMEA margins rose 240 bps sequentially to 13.8%, the highest in six quarters, as the unit reduced low-margin accounts and pivoted toward higher-value transformation projects.
• Cash flow strength: Operating cash flows reached \$576 million, or 177% of net income, the highest in five quarters, driven by working capital rationalization across all aspects of the balance sheet.
• Growth vs. margin trade-off ahead: When growth returns, management expects a margin uptick but cautions that investments in AI, people, and processes will also be needed, implying the expansion path is not purely operating leverage.

Delaporte: "What I would say is that for sure, it was important to us to show that through our actions around efficiency, productivity, automation, process improvements, all of that deep, deep activity inside the organization, the objective was to build a certain level of resilience of our margin profile."

Deal Wins & Order Book

• Booking volume healthy: Total order booking TCV reached \$3.8 billion, with large deal TCV just over \$900 million. The quarter saw 14 deals above \$30 million TCV, up from 11 in the same quarter last year, and year-to-date large deal TCV is up 20%.
• Net-new dominates large deals: Management stated that for large deals, the majority is net new, though it declined to provide a breakdown of net new versus renewals across the total book.
• Americas 1 leads: The unit booked half of the 14 large deals and grew revenue 2% sequentially, led by healthcare at 9% sequential growth. Americas 2 saw revenue drop 1.3% QoQ but order booking momentum was strong, with TCV up 46% sequentially.
• Europe's transformative wins: Four large transformative deals worth approximately \$300 million were won in Europe despite economic weakness in the region, though revenue still decreased 4.3% sequentially.
• AI embedded in every large deal: Management stated that every long-term large deal now has an AI component, and AI is embedded across most existing solutions and offerings, with every business line launching new AI offerings.

Consulting & Capco

• Bookings rebound: Capco reported double-digit sequential growth in order bookings, the highest in the last three quarters, concentrated in financial services where discretionary spend had seen some of the steepest cuts in prior quarters.
• Leading-indicator thesis intact: Management reiterated that consulting businesses are typically the first to slow in a downturn and the first to bounce back, positioning Capco's bookings momentum as an early signal for broader demand recovery.
• Scale has changed: When asked to compare current bookings to Capco's post-acquisition highs, management declined to provide specifics, noting that Capco has grown tremendously since acquisition and is now a meaningfully different business, making historical comparisons less relevant.

Delaporte: "I was the first one to recognize that the choice of our strategic decision to invest in consulting was absolutely critical to our strategy, essential, key. But we also knew that those are the businesses that typically are the first ones to slow down when there is a slowdown in the market. They are also usually among the first ones to bounce back."

AI Strategy & Internal Transformation

• From experiment to strategy: Management declared that AI has moved from curiosity and experimentation to becoming vital to business strategy, with AI now embedded in every long-term large deal and across most existing solutions.
• Workforce training at scale: 210,000 Wiproites have been trained on AI 101 skills, with persona-based learning pathways rolled out for different roles and functions. The stated goal is to ensure every employee can fully leverage AI in everyday work and on client projects.
• Internal AI adoption accelerating: A dedicated AI delivery council identifies opportunities to infuse AI into delivery activities, an AI-powered talent marketplace manages the talent supply chain, and the company is heading toward more AI-based automation internally for productivity and efficiency gains.
• Partnership ecosystem building: Wipro is collaborating with NVIDIA to help healthcare companies build AI-driven strategies, and expanding its IBM partnership to invest in next-gen joint solutions built on IBM watsonx for reliable, responsible, and sustainable AI.

Delaporte: "AI is now moving from the curiosity and experimentation stage to becoming vital, I was going to say viral as well, to business strategy."

Guidance & Commitments

Key Metrics