Wipro's Q4 FY23 Results: Flat Net Profit, Moderate Revenue Growth, and Weak Q1 Guidance

Highlights

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• The company's Gross Revenue for the quarter reached ₹231.9 billion ($2.8 billion), a decrease of 0.2% QoQ, but increased 11.2% YoY.

• The IT Services Segment Revenue increased to $2,823.0 million, showing an increase of 0.7% QoQ and 3.7% YoY.

• Non-GAAP constant currency IT Services segment revenue witnessed a decrease of 0.6% QoQ but increased 6.5% YoY.

• Total Bookings saw an increase of 29%, whereas large deal bookings increased by 155% YoY.

• The IT Services Operating Margin remained flat QoQ and stood at 16.3% for the quarter.

• The Net Income for the quarter was at ₹30.7 billion ($374.1 million), showing an increase of 0.7% QoQ but a decrease of 0.4% YoY.

• The Earnings Per Share for the quarter stood at ₹5.61 ($0.071), which increased by 0.7% QoQ but decreased by 0.5% YoY.

• The Operating Cash Flows for the quarter stood at 120.6% of Net Income, i.e., ₹37.3 billion ($453.8 million1), showing an increase of 60.0% YoY.

• Voluntary attrition witnessed a decrease of 330 bps from the previous quarter and stood at 14.1% on a quarterly annualised basis and at 19.2% on a trailing twelve months basis.

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Wipro, one of India's leading IT services companies, announced its fourth quarter results for the financial year 2023 on Thursday, April 27. The results were a mixed bag of performance and outlook, as the company reported a flat net profit growth, a moderate revenue growth, and a weak guidance for the next quarter amid a challenging business environment.

Wipro's net profit for Q4 FY23 stood at Rs 3,074.5 crore, up 0.4% year-on-year (YoY) compared to Rs 3,087.3 crore in the same quarter last year. However, on a sequential basis, the net profit declined by 0.6% from Rs 3,092.5 crore in Q3 FY23.

The company's revenue from operations rose by 11.17% YoY to Rs 23,190.3 crore in Q4 FY23, from Rs 20,860 crore in Q4 FY22. However, on a quarter-on-quarter (QoQ) basis, the revenue dipped by 1% from Rs 23,422 crore in Q3 FY23.

The revenue from IT services segment, which accounts for over 95% of Wipro's total revenue, increased by 4% YoY to $2,823 million in Q4 FY23, from $2,716 million in Q4 FY22. However, on a QoQ basis, the IT services revenue increased by 0.7%.

The IT services operating margin for Q4 FY23 was 16.3%, down from 16.9% in Q3 FY23 and 17.6% in Q4 FY22.

During the second quarter, Wipro's headcount has decreased for the second time in a row. At the end of the fourth quarter of FY23, the company had 1,823 fewer employees than the previous quarter. This is a stark contrast to the same period the previous year, where Wipro had added 11,457 employees. The preceding quarter, which concluded in December 2022, also saw a decrease of 435 employees. Wipro now has a total headcount of 256,921 employees.

Wipro also announced a share buyback proposal of Rs 12,000 crore at a price of Rs 445 per share, which is a premium of 19% over the closing price of Rs 374.5 per share on April 26. The company will buy back up to 26.96 crore shares, representing 4.91% of the total equity shares.

The company's board also recommended a final dividend of Rs 1 per share for FY23.

Commenting on the results, Wipro CEO and Managing Director Thierry Delaporte said: 

We delivered a solid performance in Q4 with secular growth across all SMUs (strategic market units), sectors and practices. We also reported our best-ever quarterly bookings over $4.1 billion.

He added that the company closed FY23 with its strongest-ever annual bookings and had two consecutive quarters of total bookings of over $4.1 billion each.

However, he also acknowledged that the business environment was challenging due to the macroeconomic uncertainties and the impact of COVID-19 pandemic on some of its key markets.

"We are seeing some softness in demand due to lower discretionary spending by clients and some project ramp downs," he said.

For the first quarter of FY24 (April-June), Wipro projected its IT services revenue to be in the range of $2,753 million to $2,811 million, which translates into a decline of 1-3% sequentially in constant currency terms.

"This guidance reflects our current view of the demand environment and takes into account the anticipated impact of COVID-19 on our business," Delaporte said.

He also said that the company was focused on executing its strategy of building global scale and leadership in its chosen domains and markets.

"We are investing in talent, capabilities and partnerships to drive profitable growth and deliver value to our clients and stakeholders," he said.

Analysts' views

Analysts had mixed views on Wipro's Q4 results and outlook.

HDFC Securities said that Wipro's Q4 performance was below expectations on both revenue and margin fronts. It also said that the Q1 guidance was disappointing and indicated a loss of momentum.

"Wipro's weak guidance reflects its relatively lower exposure to high-growth digital services and higher exposure to legacy services that are facing pricing pressure and demand slowdown," it said.

It also said that Wipro's share buyback announcement was positive but not enough to offset the weak operational performance.

ICICI Securities said that Wipro's Q4 results were largely in line with its estimates but the Q1 guidance was lower than expected.

It said that Wipro's revenue growth was impacted by lower volumes due to furloughs and holidays in some geographies and sectors.