WIPRO - Wipro Ltd. Share Price

Management Outlook and Major Points:

Outlook:
Wipro's management anticipates continued macroeconomic uncertainty, particularly influenced by recent tariff announcements, leading clients to adopt a cautious approach towards large transformation programs and discretionary spending. They expect Q1 FY26 IT Services revenue to decline between -3.5% and -1.5% sequentially (constant currency). However, margins are projected to remain stable in a narrow band (17.5% in Q4) through cost optimization and operational rigor. Growth recovery is anticipated in H2 FY26, driven by large deal ramps (e.g., the Phenix Steel deal in Europe) and pipeline conversions.

Major Points:

1. Macro Environment: Clients prioritize cost efficiency, AI-led solutions, and vendor consolidation amid global economic uncertainty and tariff impacts. Sectors like consumer, manufacturing (automotive/industrial), and Europe face direct pressure.
2. Deal Momentum: Closed $5.4 billion in large deals (17.5% YoY growth), including transformative AI-driven projects. Strong pipeline noted, but revenue conversion lags due to delayed project starts and discretionary spend cuts.
3. Margin Resilience: Operating margins expanded 110 bps YoY to 17.5% in Q4. Focus on productivity, fixed-cost optimization, and reduced bench costs to sustain margins despite revenue headwinds.
4. Sector Performance:
   • BFSI and Capco showed resilience (11.5% YoY growth for Capco).
   • Europe remains weak (-6.9% YoY) but has recovery potential via new leadership and deal pipelines.
   • Americas 1 grew 6% YoY, while APMEA improved sequentially.
5. AI & Consulting Focus: AI integration into solutions (e.g., NVIDIA partnership, crew management modernization) and consulting-led strategies (Capco synergies) are key growth drivers.
6. Talent & Leadership: Investments in upskilling, leadership development, and strategic role placements to enhance client-centricity.
7. Cash Position: Strong liquidity with $6.4 billion gross cash and 118% free cash flow conversion.

Guidance: Near-term caution with H2 recovery expected as large deals ramp up and macroeconomic conditions stabilize.

Question 1 (Nitin Padmanabhan, Investec):
"Just wanted your thoughts on which verticals are you seeing the highest impacts at this point in time?"
Answer: Sectors like consumer, manufacturing (automotive/industrial), and Europe's BFSI face direct macroeconomic uncertainty. Clients are cautious, delaying discretionary spends, but Wipro sees strong BFSI traction in the US/APMEA and a resilient Capco pipeline.

Question 2 (Abhishek Kumar, JM Financial):
"What has driven the poor conversion of deal bookings to revenue growth, given strong book-to-bill ratios?"
Answer: Large deals require longer ramp-up timelines (e.g., Q4's $1.8B deals), while revenue declines reflect delayed discretionary projects, client-specific ramp-downs, and macroeconomic headwinds. Growth depends on stabilizing demand and filling the pipeline with smaller deals.

Question 3 (Manik Taneja, Axis Capital):
"What's driving continued pressure in Europe's revenue and margins despite Capco's recovery?"
Answer: Europe's revenue decline (-2.5% QoQ) stems from delayed transformation projects and non-Capco portfolio weakness. Margins remain strained due to revenue softness, but new leadership, the Phoenix Steel deal (ramping in H2), and a strong pipeline aim to stabilize growth.

Question 4 (Vibhor Singhal, Nuvama Equities):
"Is FY26 likely to see revenue decline again, and what's the risk to margins amid weak growth?"
Answer: Q1 guidance (-3.5% to -1.5%) reflects near-term uncertainty. Full-year growth hinges on macroeconomic stabilization and H2 deal ramp-ups (e.g., Phoenix). Margins face headwinds but will target a narrow band via cost levers (bench optimization, fixed-price productivity).

Question 5 (Kumar Rakesh, BNP Paribas):
"Why has Wipro underperformed peers consistently, with 3 years of potential revenue decline?"
Answer: Weakness in Europe (-7% YoY) and APMEA (-9% YoY) offset Americas' growth (+1.2% FY25). Turnaround efforts include leadership changes, large deals (e.g., Phoenix), and consulting-led synergies with Capco to stabilize Europe and revive growth.

Question 6 (Gaurav Rateria, Morgan Stanley):
"Does lower TCV in smaller deals impact revenue conversion, and how will utilization sustain margins?"
Answer: Large deals (63 closed in FY25) drive bookings but take time to ramp. Smaller deals' slower growth delays near-term conversion. Margin resilience relies on utilization, fixed-price efficiency, and cost optimization, not just headcount adjustments.

Question 7 (Surendra Goyal, Citi):
"Is Wipro's declining sales spend affecting market share, and are investments sufficient?"
Answer: S&M spend prioritizes client-facing roles and AI/consulting investments. Non-client roles are optimized via offshoring, but Wipro claims no cuts to growth-critical sales or strategic tech investments.

Question 8 (Ankur Rudra, JP Morgan):
"How are AI-led productivity and tariff uncertainties impacting guidance and renewals?"
Answer: AI drives new revenue streams (e.g., NVIDIA partnership, smart-city projects) without deflationary pressure. Q1 guidance factors recent tariff-driven pauses but assumes stabilization. Client metrics reflect broad discretionary cuts, not FX/client losses.