Wipro(WIT) - 2026 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - IT Services revenue for Q1 was $2.59 billion, reflecting a quarter-on-quarter decline of 2% in constant currency terms, which is within the guidance range [8][21] - IT Services margin was 17.3%, an expansion of 80 basis points year-on-year [8][22] - Net income grew by 10.9% year-on-year, with EPS at INR 3.20, reflecting a 10.8% year-on-year increase [25][26] - Free cash flow generation was robust at 115% of net income, with gross cash including investments at $6.4 billion [26][27] Business Line Data and Key Metrics Changes - In the Americas, revenue grew 1.5% year-on-year in constant currency terms, while APMEA's revenue remained flat [9][23] - BFSI sector declined 3.8% sequentially and 3.5% year-on-year, while Healthcare grew 0.5% sequentially and 3.5% year-on-year [24] - Capco grew 6% year-on-year, driven by strong performance in Latin America [9][24] Market Data and Key Metrics Changes - Europe faced headwinds with a sequential decline of 6.4% and a year-on-year decline of 11.6% [23] - Digital spending in India, the Middle East, and Southeast Asia kept the market resilient [9] Company Strategy and Development Direction - The company is focusing on AI-led efficiency and transformation, with a strategic shift towards consulting-led and AI-powered solutions [16][47] - The management emphasized the importance of vendor consolidation and cost takeout deals, which are expected to drive future growth [12][22] - The company aims to maintain a balance between renewing existing contracts and securing new business [13][111] Management's Comments on Operating Environment and Future Outlook - Management noted significant macro uncertainty affecting overall demand, with clients prioritizing cost optimization and AI initiatives [6][7] - The outlook for the second half of the year is positive, supported by a strong order book and healthy pipeline [19][56] - The company is guiding for a sequential revenue growth of -1% to +1% in constant currency terms for the next quarter [19][28] Other Important Information - The Board declared an interim dividend of INR 5 per share, with a commitment to pay dividends twice a year [27][28] - The company reported bookings worth $5 billion in total contract value, a growth of 51% year-on-year, with large deal bookings reaching $2.7 billion, up 131% year-on-year [12][22] Q&A Session Summary Question: On deal wins and ACV growth - Management acknowledged that while TCV has grown, ACV growth has not kept pace due to longer deal tenures and a focus on cost takeout [31][32] Question: On capital allocation and dividend policy - The company has moved towards a dividend-focused capital allocation policy, with buybacks remaining an option for the future [34] Question: On margins and deal execution - Management indicated that while current margins are strong, there may be pressures due to upfront investments in large deals, but they aim to maintain margins in the 17% to 17.5% range [40][52] Question: On customer-specific challenges in Europe - Management stated that client-specific challenges in Europe are largely behind them, and they expect stabilization and growth in the second half of the financial year [99][100] Question: On discretionary spending trends - Management noted that discretionary spending is returning in pockets, particularly around data, AI, and modernization projects [113]