Wipro Q2 net declines but still beats street estimate; stock climbs 2%

Wipro Ltd, the third-largest software services firm in the country, saw its net profit decline 9.6% even as sequential revenue growth at 7.7% helped the company beat analyst estimates for the quarter ended September 30, 2021.

The company reported a net profit of Rs 2,930.6 crore for the July-September period. This was up nearly 19% compared with the year-ago period. However, higher costs shrunk the sequential earnings by nearly a tenth. Analysts had expected the company to pull in a net profit of under Rs 2,900 crore.

Wipro’s revenue rose 7.8% sequentially to Rs 19,670 billion ($2.7 billion), and reported a 30.1% rise compared to the same quarter last year. In the process, the company also beat street expectations on its revenues.

This added fresh fuel to the company’s stock, which rose 2% to close at Rs 672.55 a share in a strong Mumbai market on Wednesday.

Other key details:

1) IT services segment revenue was at $2.58 billion, an increase of 6.9% QoQ and 29.5% YoY.

2) Non-GAAP constant currency IT services revenue increased by 8.1% QoQ and 28.8% YoY.

3) IT services revenue was at the higher end of the $2.53-2.58 billion band projected in July.

4) Attrition shot up to 20.5% during the quarter on a trailing 12-month basis, from 15.5% as of June 30.

5) Wipro expects Q3 revenue from IT services in a range of $2.63-2.68 billion. This means a sequential growth of 2-4%.

Management commentary:

Thierry Delaporte, CEO and managing director of Wipro, said, “The Q2 results demonstrate that our business strategy is working well. We grew at over 4.5% organic sequential growth for a second quarter in a row, resulting in a 28% YoY growth in the first half of this financial year.”

Delaporte also said that Wipro surpassed the $10-billion milestone of annualized revenue run rate.

Jatin Dalal, chief financial officer at Wipro, said the company sustained its operating margins in Q2 in a narrow band even after absorbing the full impact of its recent acquisitions and investing significantly in our business across sales, capabilities and talent.

“We completed a salary increase covering 80% of our colleagues, making it the second hike in this calendar year. We delivered a robust growth in EPS of 23.8% YoY,” Dalal added.