Wipro Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Growth still elusive, but margin story strengthens: IT Services revenue grew just +0.6% QoQ CC, landing at the upper end of guidance, while operating margin expanded 35 bps QoQ to 16.8% despite absorbing one month of salary increases.
• Bookings provide the brightest signal: Total bookings of \$3.6 bn rose 8.4% QoQ, with large deal TCV of \$1.49 bn up 29% sequentially, spanning cost takeout, vendor consolidation and modernization themes.
• BFSI and Americas are carrying the portfolio: BFSI grew 2.7% QoQ for its third straight quarter of expansion, while Europe declined and Manufacturing and Energy & Utilities remain clear drags that management cannot yet put a timeline on fixing.
• Q3 guided down on seasonality, not demand shock: Guidance of -2% to 0% QoQ CC reflects furloughs and fewer working days, with margins expected to hold in a narrow band; the demand pipeline is described as healthy and secular.
• What to watch next quarter: Whether the large deal bookings convert to revenue quickly enough to lift Q4, any sign that Europe’s client-specific issues are resolved, and the January board meeting’s revised capital allocation policy.

Demand & Revenue Environment

• Americas drove what little growth there was: Americas 1 grew 1.2% QoQ on Healthcare, Technology and Communications; Americas 2 grew 0.8% on robust BFSI demand. APMEA added 0.3% with early stabilization signs, while Europe declined 0.1% on weak demand and client-specific ramp-downs where a couple of clients changed direction.
• BFSI is the standout vertical: Third consecutive quarter of growth at 2.7% QoQ, led by the Americas with momentum building in APMEA and Europe, supported by strong account mining and Capco traction. Technology & Communications grew 1.6% on a recent large deal ramp-up.
• Manufacturing and Energy & Utilities are the problem children: Manufacturing declined 2% QoQ and E&U fell 3.7%, with management acknowledging Wipro has been slow relative to peers in these sectors. Pipeline and traction exist in automotive, industrial and energy cost-optimization segments, but deals must still be won.
• Active customer count declined: The exit of certain tail accounts in APMEA several quarters ago and a weaker discretionary spend environment at the bottom end of the pyramid both contributed.
• Large account concentration is deepening: The top account grew 4% sequentially, the top 5 grew 6.2%, and the top 10 grew 3.7%, reflecting a deliberate strategy to expand footprint in the largest relationships.
• Q3 headwinds are seasonal, not structural: Furloughs are factored in at levels similar to last year, with Capco and consulting particularly susceptible; lower working days are a normal Q3 dynamic; softness in Europe is also embedded in the guide.

Aparna Iyer: "Nitin, we have grown in Q2. I think the key for us is to really build sustainable growth that we can deliver consistently, right? And that is still work-in-progress."

Deal Wins & Pipeline

Large deal momentum improved sharply: Q2 large deal TCV of \$1,489 mn was up 29% QoQ and 16.8% YoY, driven by proactive client engagement, consulting-led and AI-powered solutions, industry-specific domain plays, and disciplined pipeline qualification.

• Pipeline is healthy and secular: Management described momentum across all four markets and six sectors, with a mix of large, mid-size and smaller deals. The focus is on securing wins quickly in Q3 to build revenue momentum into Q4.
• Conversion timeline varies by deal: One large deal won earlier will take several quarters to ramp; another won in Q2 ramped instantly. Net new in bookings was fairly good in Q2, and full conversion typically takes 2 to 3 quarters.
• Q4 setup depends on Q3 execution: Furloughs and working-day headwinds should abate in Q4, and deal momentum could add to growth, but management stopped short of confirming Q4 will be better.

Srini Pallia: "All I can say at this point in time is healthy, there is momentum around the deal pipeline and it's also secular across the four markets and across the six sectors that we operate in, which is for me a good news."

Margins

• Improvement came through gross margin: S&M and G&A as a combined bucket remained flat; there were certain one-off credits and hits which are part of every quarter, with S&M higher and G&A lower but no net SG&A change.
• Traditional levers are all contributing: Utilization has improved consistently over recent quarters and remains well above benchmark; offshoring has flexed; fixed-price projects and pyramid improvements are in play; G&A optimization is paying off in Q3; acquired entity integration is yielding synergy benefits on overheads; Europe and SMU profitability orientation is improving.
• Q3 margin confidence despite revenue softness: Management expects to maintain margins in a narrow band through the furlough-heavy quarter, with the incremental impact of salary increases also absorbed.
• The 17%+ target needs revenue growth to stick: The margin improvement delivered so far has come against a backdrop of revenue decline; to touch and sustain beyond 17% operating margins, the revenue environment also needs to improve.

Srini Pallia: "Despite the softness in revenue in Q3, we are confident of maintaining our margin in a narrow band."

Capital Allocation & Shareholder Returns

• Bonus issue recommended: The board recommended a 1:1 bonus share issue, subject to shareholder approval.
• Revised capital allocation policy in the works: A new policy aligned with a 2-3 year strategic track plan is being drawn up; details are expected after the January board meeting. Management declined to characterize the approach or commit to buyback vs dividend until the policy is finalized.
• M&A remains a strategic priority: The company continues to look for opportunities in specific white spaces, markets or sectors, with a deliberate and focused approach. M&A is described as a big part of strategy, but management declined to label it a "string of pearls" approach.

AI & GenAI Positioning

• GenAI seen as a net positive across three buckets: AI-led projects in software development and product engineering, infusing AI into managed services, and AI-powered solutions conceptualized with AI at the core. Management believes GenAI will be positive for both Wipro and the industry.
• Early revenue signals are embedded in deals: The software technology company total outsourcing win includes GenAI-powered solutions, and the vendor consolidation deal spans infrastructure, applications and process with an AI-enabled lens.
• No quantified AI revenue disclosure yet: Unlike peers who now break out AI revenue, Wipro discussed GenAI only in thematic and pipeline terms, with no annualized run-rate or book-of-business figure provided.

People & Operating Model

• Merit salary increase implemented on an accelerated cycle: Effective September 1, just nine months after the last cycle, with one month of the impact absorbed in Q2 margins.
• Account-specific academies launched: New academies established to upskill employees aligned with specific clients' business needs, complementing existing training infrastructure.
• Leadership aligned on five strategic priorities: Top-300 leaders gathered in Bangalore to focus on large accounts in priority sectors and markets, large deals with proactive demand shaping, consulting-led and AI-powered industry solutions, building talent scale with the right mindset and skills, and client centricity defined across five pillars.

Guidance & Commitments

Key Metrics