Indian IT services company Wipro is all set to announce its Q4 FY 23 earnings on Thursday. All eyes are, therefore, resting on Wipro's results, especially after the company's two other rivals, Tata Consultancy Services (TCS) and Infosys posted disappointing numbers, far below their growth projections earlier this month.
Although, Wipro changed its operating structure mid-year, despite this analysts expect the company to post a decline in revenues sequentially.
Revenues
ICICI Direct Research noted in its report: “Wipro is expected to report a QoQ revenue decline of 0.5 per cent.”
Similar revenue projections were made by DART, on the back of cuts in discretionary IT spends.
“Expect revenue decline of 0.6 per cent in constant currency terms QoQ in line with guidance of (0.6) percent to 1 per cent due to softness in consulting business and discretionary spend,” the report highlighted.
Softness in consulting business
Both Motilal Oswal and HDFC Securities expect softness from the consulting business. Consulting is one of the major drivers of the company’s revenues and is also one of the four new operating verticals at the company, Wipro Consulting.
“There’s weakness in discretionary and consulting services including Capco which is tracking 3-4 per cent from its peak revenue (~USD 1bn), HDFC Securities noted.
Capco is an IT consulting company acquired by Wipro in April 2021.
“Consulting should remain soft. Clients continue to cut discretionary spending," noted Motilal Oswal.
Margins
ICICI Direct Research also expects a decline in margins due to the ongoing global macroeconomic headwinds, which have besotted tech companies worldwide.
“Wipro is expected to report a margin decline between 20 and 140 basis points,” ICICI's report said.
“On the margins front, we expect margins of most IT companies to be muted due to headwinds such as lower revenue, which despite some cost optimisation levers will impact margins for the quarter,” ICICI Direct further added.
Hiring
Experts believe that hiring numbers are also expected to remain muted, just like previous quarters.
Furthermore, the HDFC Securities report noted that the employee utilisation at the company could improve. Also, the hiring, especially fresher hiring would be recalibrated based on demand.
“Margin levers are pyramid structure, utilization, and automation offset by headwinds like lower revenue growth and normalisation of travel and facility expenses”, the report said.
“Fresher hiring of 24-25k in FY23E will be recalibrated based on demand, but there is a lot of scope to improve the pyramid as historically Wipro has been lower than peers on freshers,” HDFC securities added.
Business Today has been reporting since September last year that the company has been delaying onboarding of freshers for over 12 months due to drop in demand for IT services.
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