Wipro Limited 2027 Q2 Earnings Call

Welcome everyone to Wipro's second quarter earnings press conference. For those of us who are joining virtually, good morning, good afternoon, good evening. My name is Nisha Chandrasekaran, and I will be your moderator for today. Joining me on stage is our Chief Financial Officer, Aparna Iyer; our Chief Executive Officer and Managing Director, Srini Pallia; and our Chief Human Resources Officer, Saurabh Govil. We will begin with opening remarks from our CEO, followed by the financial review from our CFO. Post that, we will open the floor for your questions. With that, let me hand over to our CEO and Managing Director, Srini Pallia.

Thanks, Nisha. Good evening, everyone. Thank you for joining us today. In this quarter, demand environment has remained largely unchanged. Our clients remain focused on efficiency and productivity, while increasingly looking to accelerate AI adoption and drive long-term value. In fact, this balance between efficiency and growth is shaping demand across industries for us. Let me begin with what we see in our priority sectors. In BFSI, we continue to see strong momentum. Clients are focused on cost optimization, legacy modernization, and of course, scaling agentic AI across their enterprise. Digital-native and new-age firms are driving demand in our technology sector. Investments in custom silicon, design to manufacture, and physical AI are creating opportunities across the engineering value chain. In fact, we also see growth emerging across AI model ecosystems from model training, evaluation, to execution.

In EMR, which is our energy and manufacturing and resources sector, we have seen some good wins in previous quarters, and in fact, those deals are ramping up. This sector for us continues to gain traction across markets, and I would specifically like to call out BPS and engineering. In consumer sector, we are seeing good traction in CPG, travel, and transportation. Our recent new wins and revenue from Olam deal have also supported our performance in this sector. However, healthcare in U.S. continues to be affected by policy changes. At the same time, cost pressures across payers and providers are creating new outsourcing opportunities for us. This, along with our differentiated platform-based offerings and rising regulatory requirements, we are shaping our pipeline. Now, moving to our financial performance for the quarter.

In quarter 2, our IT services revenue stood at $2.61 billion, flat sequentially, and up 0.6% year-on-year in constant currency. Our operating margin for the quarter was 16.5%, an improvement of 0.5% compared to last quarter. Within our markets, three of our four SMUs reported sequential growth. Americas One declined sequentially due to client-specific issues and softness in healthcare. Americas Two grew sequentially, driven by EMR with encouraging momentum in BFSI. Europe grew sequentially and year-on-year, delivering broad-based growth led by three sectors: BFSI, consumer, and EMR. Our APMEA SMU maintained strong traction, growing sequentially and year-on-year. Growth here was fueled by consumer, tech, and comms. Coming to deal wins and pipeline. This quarter, we closed $2.6 billion in total contract value and signed nine large deals. In fact, our bookings reflect a healthy mix of new business and expansion of existing engagements, which is very good news.

Here is an example of a consulting-led AI-powered transformation deal I wanted to talk to you about. A global financial institution engaged Wipro to accelerate its transformation through an AI-enabled operating model. Through this engagement, we will modernize software development, drive greater efficiency across the change lifecycle, and scale AI-powered ways of working. For the clients, this results in faster execution, broader AI adoption, and an agile operating model. This win, among others, including a large deal in energy last quarter, reflects growing impact of our consulting-led strategy in originating larger opportunities for us. I want to call this out. Beyond large enterprises, we see strong traction in deal wins and pipeline in the mid-market segment. These organizations understand that AI can be a force multiplier in scaling capabilities and redefining their competitive landscape. Let me give you an example.

A global mid-market consumer products company selected us to accelerate their technology transformation, and we are helping this by establishing an AI capability center in India. Through this engagement, we will scale engineering and technology operations to support their entire ERP modernization, cloud-native platforms, and build AI capabilities for them. This outcome will also drive innovation, improve their engineering productivity, and strengthen their global delivery model. In fact, we are beginning to see tangible returns from our strategic investments made in recent quarters. One, Mindsprint. It has strengthened our position in food and agriculture and opened new market opportunities for us. Two, Harman DTS. It has boosted our engineering capabilities, helping us win new logos and deepen existing client engagement. We will continue to make these investments even when they create near-term margin headwinds for us.

They enhance our strategic position, expand addressable markets, and build a stronger foundation for future growth. If you recollect, in April, we launched our AI native unit to help clients transition from traditional delivery models to an AI-native enterprise. We are making rapid progress here. Today, with over 2,000 engineers, including FDEs, we are seeing growing success in outcome-based deals and driving nonlinear growth. This investment has already delivered results for us. Let me share a few examples. One, an SLM deployment for a major U.S. retail bank. Two, implementation of an AI-powered digital plan for one of the largest petrochemical companies in the Middle East. Three, an enrollment and billing SLM deployment for a leading U.S. healthcare payer. We have also built industry-specific SLMs for wealth management, insurance, aviation, and asset-intensive industries, and we are seeing good traction around that.

Combined with our AI agents and our orchestration platform, these capabilities enable us to transform virtually any business workflow into an AI-native workflow, thereby helping our clients unlock new levels of productivity, speed, and more importantly, business value. Based on growing traction, we have also accelerated investments in AI services and solutions across emerging AI growth themes. AI data centers, AI foundry services, physical AI devices, and design to manufacturing. These services and solutions position us well across the full AI value chain and help us capture opportunities that extend beyond traditional technology spend. With that, let me share our guidance for the next quarter. For us, Q3 will remain impacted by seasonal furloughs. We are guiding for a sequential IT services revenue growth of -1.5% to +0.5% in constant currency. Despite a challenging macro environment, our business remains resilient.

We are very encouraged by emerging opportunities across all our markets. In fact, AI will expand new growth avenues, accelerate demand for higher value transformation. Signs of this are already evident in the momentum we are seeing across our new AI services. With that, I will now invite Aparna to share details on our financials.

Thank you very much. Thank you, Srini.

Good evening, ladies and gentlemen, and thank you for joining us. Let me share an update of the financial performance for the quarter ended 30th September 2026, and after that we will open it up for Q&A. Our IT services revenue for Q2 grew 0.6% on a year-on-year basis in constant currency. Revenue was flat sequentially in constant currency terms, and was closer to the upper end of the guidance that we had given last quarter. Our operating margins for the quarter were 16.5%, an expansion of 50 basis points sequentially. Operational improvements, rupee depreciation, offset by continuing investments in our business, have been the underlying factors this quarter. We will work towards improving our margins even as we create head space for growth. Moving on to the SMU performance and the sector performance. All growth numbers that I will share will be in constant currency.

Americas I declined 2% sequentially and 2.7% on a year-on-year basis. Americas II grew 0.9% sequentially and declined 4.7% on a year-on-year basis. Europe grew 0.6% sequentially and grew 5.1% on a year-on-year basis. APMEA grew 3.1% sequentially and 13.3% on a year-on-year basis. Moving on to key sectors. BFSI grew 1% sequentially and 1.3% on a year-on-year basis. Consumer grew 2.6% sequentially and 6% on a year-on-year basis. Technology and communication declined 2.6% sequentially and grew 7% on a year-on-year basis. Health declined 3.8% sequentially and 6.5% year-on-year. EMR grew 1.1% sequentially and declined 6% on a year-on-year basis. Let me share with you certain other financial parameters. Our net other income, which primarily includes interest income, declined 68% sequentially due to the reduction in investment portfolio after completion of our buyback in June 2026.

As a result of the lower income, our net income was at INR 32 billion for the quarter. It declined 4.7% sequentially. What is a critical metric this quarter, given that we completed the buyback, is the EPS, which grew 0.9% sequentially and 4.2% on a year-on-year basis. While striving to deliver profitable growth, we remain equally relentless in driving cash flow conversion. Q2 is yet another quarter of robust performance. Our operating cash flows stood at 166% of net income. With this, our gross cash now stands at $4.6 billion as of 30th September 2026. Our effective tax rate was at 23.9% for Q2 versus 23.8% in the same quarter last year. Accounting yield for average investments held in India was at 7.1%. In terms of the guidance, I want to reiterate what Srini stated.

Our guidance for quarter 3 will be in the range of $2.571 billion to $2.625 billion. This translates to a sequential guidance of negative 1.5% to a positive 0.5% in constant currency terms. With that, I will hand it over to you, Nisha.