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20-07-2024
Bureau Report + Agencies
NEW DELHI/ BENGALURU: Wipro, opens new tab, India’s fourth-largest IT services player, missed quarterly revenue expectations on Friday due to prolonged softness in key geographies such as Europe, and Asia Pacific, India, Middle East and Africa (APMEA).
The company’s consolidated revenue fell 3.8% to 219.64 billion rupees ($2.63 billion), below analysts’ estimates of 225.9 billion rupees, per LSEG data.
Bengaluru-based Wipro, the only firm among the top IT companies to provide a quarterly forecast, said it expects IT services revenue of $2.6 billion to $2.65 billion in the second quarter, indicating a sequential decline of 1% to a growth of 1%.
Chief Executive Srinivas Pallia said that the company reported growth in its Americas 1 market, which includes Latin America. Growth in its European and APMEA markets fell 11.6% and 13.2%, respectively.
Wipro saw quarterly revenue decline year-on-year in all of its verticals except health, while banking, financial services and insurance, its largest vertical, fell 5.3%. It reported its steepest decline in the communications vertical, which was down 21.9%.
Peers such as Tata Consultancy Services, opens new tab, Infosys, opens new tab, and HCLTech, opens new tab have reported better-than-expected first-quarter results, boosting hopes of a recovery in the IT sector.
However, the companies have maintained that the discretionary spending environment remains subdued.
The sector has been grappling with clients tightening their purse strings for discretionary spending amid global economic uncertainties and higher interest rates that make borrowing more expensive.
Wipro’s net profit rose 4.6% to 30.03 billion rupees in the quarter ended June, beating analysts’ estimates of 29.48 billion rupees, as per LSEG data.
Meanwhile, Tata Consultancy Services, opens new tab, India’s top IT services company, said despite slightly surpassing first-quarter revenue estimates, it is “too early” to predict sustained growth in future quarters.
“The reason why we are hesitant to call sustained growth is we find market conditions to be quite volatile,” said CEO K Krithivasan.
The uncertainty stems from customers holding back tech spends as they are preparing for a “rainy day”, he added in a post-earnings press conference.
High interest rates and geopolitical risks have impacted demand for services from Indian IT companies since FY23. Clients worldwide are cutting discretionary tech spending and awarding more cost-cutting deals, which have lower margins.
The company’s consolidated revenue rose 5.4% to 626.13 billion rupees ($7.50 billion) in the June quarter. Analysts, on average, expected revenue at 622.07 billion rupees, as per LSEG data.
The Tata group company’s net profit rose 8.7% to 120.40 billion rupees in the first quarter, barely above the 119.78 billion rupees forecast by analysts.
The company won deals worth $8.3 billion during the quarter, down from a record $13.2 billion in the quarter ended March.
The revenue growth was bolstered by mega deals it won in the last fiscal such as Bharat Sanchar Nigam (BSNL) and insurer Aviva. TCS announced four mega deals (contracts over $500 million) in the last fiscal year even as clients clamped down on discretionary tech spending due to an uncertain macroeconomic environment.
Revenue from the manufacturing segment rose 9.4% year-over-year. Revenue from four out of its eight segments, including banking and financial services, fell.
