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Wipro reported a steady operating performance in 2Q. IT Services revenue declined 0.1% qoq to $2.61bn (flattish cc), above our estimate of $2.59bn. IT Services EBITM increased by 50bps qoq to 16.5%, in line with our estimate. Demand environment is largely unchanged, with clients focusing on efficiencies and increasingly looking at accelerating AI adoption. Deal intake stood at ~$2.6bn (including 9 large-deal bookings with large deal TCV of ~$0.7bn), with book-to-bill of ~1x. Management expects to sign the two large deals that slipped from 2Q to 3Q, and anticipates strong bookings on a robust pipeline, which should support 4Q revenue. It guided for -1.5% to 0.5% qoq CC revenue growth in 3Q, a tad better than our estimate, with number of furloughs expected to be similar to last year’s. Client-specific issues are largely behind and should mostly play out by 3Q, while Health is expected to see a seasonal uptick in 3Q, though smaller vs previous years. Wipro aspires to improve margin in coming quarters via operational efficiencies, while continuing to invest in growth. We cut FY27-29E EPS by ~0.4 to 1.3%, after factoring in the 2Q performance. We retain REDUCE on Wipro and TP of Rs170, at 12x Sep-28E EPS.

Results summary

Wipro logged a 0.1% qoq dip in IT Services revenue to $2.61bn (flattish cc), above our estimated $2.59bn. IT Services EBITM rose by 50bps qoq to 16.5%, in line with our estimate, driven by operational improvement and rupee depreciation, partially offset by continuing investments. Wipro signed large deals worth $0.7bn TCV. Overall order booking stood at $2.6bn (book-to-bill: ~1x). Total headcount was down 2.8% qoq at 236,328. Attrition (TTM IT Services ex BPS) fell by 10bps qoq to 13.8%. What we like: Steady operating performance, strong cash conversion (OCF/EBITDA ~107%). What we do not like: Weak order intake, softness in Health and Technology & Communications.

Growth across most verticals offset by weakness in Healthcare and Tech

Revenue growth was led by Consumer (2.6% qoq CC), EMR (1.1%), and BFSI (1.0%), negated by the decline in Technology & Communications (-2.6%) and Health (-3.8%). Consumer saw traction in CPG and Travel & Transportation, aided by new wins and the Olam deal, while US Healthcare remains impacted by policy changes. BFSI continues to see healthy momentum. EMR posted recovery in growth on the back of large-deal ramp ups. Digital native and new age firms are driving demand in the tech sector.

Weakness in Americas 1 cushioned by growth across other SMUs

Among strategic market units, APMEA grew 3.1% qoq CC, driven by Consumer, Tech, and Communications. Americas 2 grew 0.9%, led by EMR, with momentum in BFSI, while Europe grew 0.6%, with broad-based growth across BFSI, Consumer, and EMR. Americas 1 declined 2.1% due to client-specific issues and softness in Healthcare, though client specific issues should largely play out by 3Q.

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