Wipro Ltd. Q2 FY2027 earnings call

• Demand Drivers: Strong momentum driven by client focus on cost optimization, legacy modernization, and scaling Agentic AI. Digital natives and new-age firms are key demand sources.
• Strategic Wins: Closed $2.6 billion in TCV with 9 large deals. Highlighted consulting-led AI transformation wins in BFSI and Energy, demonstrating the impact of this strategy.
• Mid-Market Growth: Significant traction in mid-market segments, exemplified by a global CPG company establishing an AI capability center in India for ERP modernization and cloud-native platforms.
• AI Native Unit Progress: Launched in April, now employs over 2,000 engineers. Achieving success in outcome-based deals with deployments in US retail banking, Middle Eastern petrochemicals, and US healthcare payers.
• Industry-Specific Solutions: Built industry-specific Small Language Models (SLMs) for wealth management, insurance, healthcare, aviation, and asset-intensive industries, integrated with AI agents and orchestration platforms.
• Acquisitions: Mindsprint strengthened food/agriculture capabilities; Harman DTS enhanced engineering and design-to-manufacturing offerings. These investments create near-term margin headwinds but build long-term strategic foundations.
• Resilience: Business remains resilient despite macro challenges, with robust pipeline visibility for future quarters.

IT Services Revenue: $2.61 billion (flat sequentially, +0.6% YoY constant currency). Operating Margin: 16.5% (+0.5% improvement YoY).

Geographic Performance (Constant Currency):

• Americas: Flat sequentially; -4.7% YoY.
• Europe: +0.6% sequentially; +5.1% YoY.
• APMEA: +3.1% sequentially; +13% YoY.

Sector Performance (Constant Currency):

• BFSI: +1% sequentially; +1.3% YoY.
• Consumer: +2.6% sequentially; +6% YoY.
• EMR: +1% sequentially; -6% YoY.
• Tech & Comms: -2.6% sequentially; +7% YoY.
• Healthcare: -3.8% sequentially; -6.5% YoY.

• Q3 FY27 IT Services Revenue Guidance: $2.571 billion to $2.625 billion.
• Sequential Growth Expectation: -1.5% to +0.5% in constant currency terms.
• Key Headwinds: Guidance is impacted by seasonal furloughs and low working days typical for the quarter.
• Outlook: Management expects deal slippages from Q2 to close in Q3/Q4, providing upside potential for Q4 revenue conversion.

• Seasonal Impacts: Q3 revenue guidance includes negative impacts from seasonal furloughs and reduced working days.
• Deal Execution Delays: Some large contracts could not be signed on time in Q2, potentially affecting short-term booking metrics, though pipeline remains robust.
• Margin Pressure: Continued investments in AI and acquisitions (e.g., Mindsprint, Harman DTS) create near-term margin headwinds, although operational improvements aim to offset these.

Q: Girish Pai (BOB Capital Markets) asked about the decline in TCV and GCC monetization opportunities.

A: Srini explained that two large deals slipped due to signing delays but will close soon, keeping the pipeline robust. Regarding GCCs, he identified four opportunity areas: migration, monetization, expansion, and consolidation, noting growing interest from clients selling off GCCs.

Q: Ravi Menon (Access Capital) questioned why BFSI growth hasn't fully recovered despite peer strength.

A: Srini highlighted a 1% sequential BFSI growth, citing a major consulting win and the ramp-up of a previously delayed mega-deal. He noted that a specific European client’s shift to captive work is reversing, and Capco’s performance across continents is strong, with AI/data investments driving resilience.

Q: Sudhir Guntupalli (Kotak Mahindra AMC) asked if Wipro would use its cash-rich balance sheet for large bank-like acquisitions to gain competitive advantage.

A: Srini affirmed that inorganic strategy focuses on enhancing consulting-led, AI-powered capabilities in priority sectors. He cited Harman DTS (engineering/design) and Mindsprint (food/agri) as examples of value-accretive tuck-in acquisitions rather than large transformative bank-style deals.

Q: Vibhor Singhal (Nuvama Equities) sought clarity on healthcare weakness and deal slippages.

A: Srini attributed healthcare declines to policy changes (Medicaid/ACA) but noted building demand from first-time outsourcers due to cost pressures. He confirmed that Q2 deal slips were administrative, not lost, and will boost Q3/Q4 bookings given a robust pipeline.

Q: Ashwin Mehta (Ambit Capital) asked about headcount cuts and health enrollment drops.

A: Saurabh Govil (CHRO) stated headcount is flat YoY; campus hiring paused in H1 due to volume but will resume in H2. Srini added that while US payer policy changes impacted enrollments, the pipeline for new outsourcing deals is building, expecting health to benefit from seasonality in Q3.