Wipro Limited 2027 Q2 Earnings Call

Thank you, Yashaswini. Good evening. Warm welcome to our Q2 FY 2027 earnings call. We will begin the call with the business highlights and overview by Srinivas Pallia, our Chief Executive Officer and Managing Director, followed by updates on financial overview by our CFO, Aparna Iyer. We also have our CHRO, Saurabh Govil, on this call. Afterwards, the operator will open the bridge for Q&A with our management team. Before Srini starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Securities Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The uncertainties and risk factors are explained in our detailed filings with the SEC.

Wipro does not undertake any obligation to update the forward-looking statements to reflect events and circumstances after the date of filing. The conference call will be archived, and the transcript will be available on our website. With that, I would like to turn over the call to Srini.

Srini, over to you. Thank you, Abhishek.

Good evening. Thank you all for joining us today. 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 values. This balance between efficiency and growth is shaping demand across industries. 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 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. We also see growth emerging across AI model ecosystems, from model training and evaluation to execution.

In EMR, energy manufacturing and resources sector, we have seen some good wins in previous quarters, and those deals are ramping up. This sector continues to gain traction across markets. Specifically, I would 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 the U.S. continues to be affected by policy changes. At the same time, cost pressures across payers and providers are creating new outsourcing opportunities. This, along with our differentiated platform-based offerings and including rising regulatory requirements, we are shaping our pipeline. 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. Within our markets, three of our four SMUs, Strategic Market Units, reported sequential growth. Americas 1 declined sequentially due to client-specific issues and softness in healthcare. Americas 2 grew sequentially, driven by EMR with encouraging momentum in BFSI. Europe grew sequentially and year-on-year, delivering broad-based growth led by BFSI, consumer, and EMR. APMEA maintained strong traction, growing sequentially and year-on-year. Growth 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. Our bookings reflect a healthy mix of new businesses and expansion of existing engagements. Let me give an example of a consulting-led AI-powered transformation deal. A global financial institution engaged Wipro to accelerate its transformation to an AI-enabled operating model.

Through this engagement, we will modernize software development, drive greater efficiency across the life cycle, and scale AI-powered ways of working, resulting in faster execution, broader AI adoption, and an agile operating model for our client. This win, among others, including a large deal in energy last quarter, reflects growing impact of our consulting-led strategy in originating larger opportunities. Beyond large enterprises, we also 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. As an example, a global mid-market consumer products company selected us to accelerate their technology transformation by establishing an AI capability center in India. Through this engagement, we will scale engineering and technology operations to support ERP modernization, cloud-native platforms, and AI capabilities for our client.

Outcome will drive innovation, improve engineering productivity, and strengthen global delivery model for our client. We are beginning to see tangible returns from our strategic investments made in recent quarters. Mindsprint has strengthened our position in food and agriculture, opening new market opportunities. Harman DTS has boosted our engineering capabilities, helping us win new logos and deepening existing client engagements. We will continue to make these investments even when they create near-term margin headwinds. They enhance our strategic position, expand addressable markets, and build a stronger foundation for future growth. In April, if you recollect, we launched our AI Native unit to help clients transition from traditional delivery models to AI-native enterprises. We are making rapid progress. With over 2,000 engineers, including FDEs, Forward Deployed Engineers, we are seeing growing success in outcome-based deals and driving nonlinear growth. This investment is already delivering results. Let me share a few examples.

One, an SLM deployment for a major U.S. retail bank. Two, implementation of an AI-powered digital plant for one of the largest petrochemical companies in the Middle East. And three, an enrollment and billing SLM deployment for a leading U.S. healthcare payer. In addition, we also built industry-specific SLMs for wealth management, insurance, healthcare, aviation, and asset-intensive industries. Combined with our AI agent and orchestration platform, these capabilities enable us to transform virtually any business workflow into an AI-native workflow, helping our clients unlock new levels of productivity, speed, and business value. Based on growing traction in AI, we also accelerated investments in AI services and solutions across five emerging AI growth themes: AI data centers, AI foundry services, physical AI devices, and design to manufacturing.

In fact, 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. Q3 for us 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 markets. AI will expand new growth avenues and accelerate demand for higher value transformation. Signs of this are already evident in the momentum we are seeing across our new AI services. I will now invite Aparna to share details on our financials. Thank you. Over to you, Aparna.

Thank you, Srini. Good evening, everybody, and thank you for joining us. I will share a quick update on the financial performance for quarter 2, and after that, we can open it up for Q&A. Our IT services revenue grew 0.6% year-on-year in constant currency terms. Revenues were flat sequentially in constant currency terms. Our operating margins for the quarter were 16.5%, an expansion of 0.5% sequentially. Operational improvements, rupee depreciation, offset by our continuing investments in business have been the underlying factors driving this improvement. We will work towards improving the margins even as we create headspace for growth. In terms of the SMU performance and sector performance, I will share a few numbers. All of them are in constant currency terms. Americas 2 grew 0.9% sequentially, 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% on a year-on-year basis. Our Americas 1 business was soft and declined 2.1% sequentially and 2.7% on a year-on-year basis. From a sector standpoint, 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. Energy, manufacturing, and resources grew 1% sequentially while declining 6% year-on-year. Technology and communications declined 2.6% sequentially while they continued to grow on a year-on-year basis at 7%. Health declined 3.8% sequentially and declined 6.5% on a year-on-year basis. In terms of other key financial parameters, our net other income, which includes the interest income, declined 68% sequentially, primarily because the investable surplus reduced quarter-on-quarter owing to completion of a buyback in June 2026. As a result of the lower other income, our net income was reported at INR 32 billion for the quarter. It declined sequentially by 5%.

However, the EPS, which is the right metric given that we completed a buyback for the quarter, was at INR 3.23, which it increased 0.9% sequentially and 4.2% on a year-on-year basis. We remain relentless in our cash flow generation. Quarter two is yet another quarter of robust operating cash flows. We generated 166% of net income. With this, our gross cash as of September 30 was at INR 4.6 billion. Our effective tax rate was at 23.9%, flattish compared to same quarter last year. Accounting yield for the average investments held in India was at 7.1%. In terms of the guidance, like Srini said, we expect our revenues to be in the range of $2.571 billion to $2.625 billion, which translates to a sequential guidance of negative one and a half to a positive half percent in constant currency terms. We can now open the line up for Q&A.