Wipro Share Price Falls Over 4% After Q2 Results

Wipro, a prominent IT services company, has been facing a challenging period. Information Technology company recently released its earnings report for the July-September quarter (Q2), and the results were disappointing. As a consequence, Wipro's stock price dropped by over 4% on the Bombay Stock Exchange (BSE) on October 19, opening at ₹393. 

Wipro's revenue in Q2 stood at $2.71 billion, showing a 2.3% sequential decline and a 3.7% fall from the previous year. In constant currency terms, sequential growth also decreased by 2%. During the same period, Tata Consultancy Services Ltd (TCS) achieved a dollar revenue growth of 5.7%, Infosys Ltd recorded a growth of 3.7%, and HCL Technologies Ltd saw a growth of 5.2%. 

Wipro's net income in Q2 saw a 9% decline sequentially, reaching $318.5 million, largely due to a 13% increase in expenses. Over the past year, the stock has given a 4% gain compared to the 11% increase in the benchmark Sensex. The stock price has declined by 8% in the past month, including today's drop. However, looking at the six-month period, the stock is still up by 9%. Over a more extended timeframe of five years, the stock price grew by 63%. The company's stock reached a 52-week high of ₹443.60 on September 15 this year and a 52-week low of ₹351.85 on April 17.

Read Wipro Q2 Results FY2024

Business Segment Performance

Wipro's performance across various business segments in Q2 varied. Healthcare, Life Sciences, and Services showed a growth of 7.1% in constant currency YoY, while Communications experienced the largest decline, falling by 14.6%. The company is experiencing difficulties in converting total contract value (TCV) into revenue.

Merger of Subsidiaries

Wipro's board approved the merger of five of its wholly-owned subsidiaries into the main company. These subsidiaries include Wipro HR Services, Wipro Overseas IT Services, Wipro Technology Product Services, Wipro Trademark Holding, and Wipro VLSI Design Services.

Expert Opinions & Future Outlook 

Expert opinions and brokerage firms are not particularly optimistic about Wipro's stock post Q2 earnings, maintaining a 'reduce' call on the stock, and lowering the target price to ₹375 from ₹405. They expressed concerns about Wipro's weak growth compared to its peers, and a lack of major deals.

HSBC, BofA Securities, and Citi all maintained pessimistic outlooks on the stock, with target prices ranging from ₹350 to ₹360. These opinions are influenced mainly by Wipro's poor growth and market share erosion.

Wipro's guidance for Q3FY24 doesn't offer much hope, with a projected revenue decline of 1.5% to 3.5%. The company attributes this to an uncertain business environment with high inflation, interest rates, and lower discretionary spending.

Wipro's challenges extend into the future, with many analysts projecting weak growth. Investors are keen to see how the company addresses these challenges, particularly its lagging growth rates compared to its peers, senior management stability, and revenue growth strategies.

Wipro's CEO, Thierry Delaporte, remains optimistic despite challenges. He mentioned that we are still succeeding in the market, even with uncertain economic conditions. In Q2, we secured 22 accounts over $100 million, double from FY21. Our large deal total contract value also hit $1.3 billion, the highest in the last nine quarters.

Despite the tough environment, we are making bold decisions to achieve our long-term goals. This includes investments in technology, streamlining operations, and training our people for the AI-driven future. ai360 strategy is making our organization more efficient, and we believe these efforts will keep us competitive in a constantly changing business landscape.

Final Words

Wipro's recent financial performance and outlook have raised concerns among investors and analysts. The company faces significant challenges in an uncertain market environment. Whether it can turn the tide and achieve sustainable growth remains to be seen, but it's clear that Wipro is working on strategies to adapt and thrive in the ever-evolving IT landscape.