Wipro Q2 results for the September quarter marked a significant turnaround, with large deal bookings reaching $1.5 billion, the highest in the past 10 quarters. This robust figure highlights the company’s ability to secure large-scale contracts amid a challenging business environment, demonstrating resilience and a clear recovery trajectory.
In its earnings update on Thursday, Wipro projected a quarter-on-quarter revenue growth ranging from a 2% decline to flat growth for the October to December period. The IT giant expects revenue for the upcoming quarter to range between $2,607 million and $2,660 million. This conservative outlook reflects cautious optimism as the company aims to build on its Q2 momentum while navigating uncertain global economic conditions.
The company’s performance in the second quarter of FY25 is particularly notable as it ended a six-quarter streak of declining revenues. Wipro’s Q2 results revealed a 0.6% growth in constant currency revenue quarter-on-quarter, signaling a positive shift after a prolonged period of contraction.
Wipro Q2 Results: Revenue and Profit Surpass Expectations
For Q2FY25, Wipro’s US Dollar revenue stood at $2,660 million, slightly surpassing analysts’ expectations, which had pegged the figure at $2,651 million. This modest overperformance, though incremental, is a positive indicator that Wipro is on the path to recovery. The company’s growth was also reflected in its performance in rupee terms, where revenue rose by 1.3%, compared to the 1% increase projected by the SMT poll.
Earnings Before Interest and Tax (EBIT) for the quarter amounted to ₹3,732 crore, reflecting a 3.5% growth from the previous June quarter. This figure also exceeded market estimates, which had forecast EBIT at ₹3,666 crore. Wipro’s EBIT margin for the quarter stood at 16.8%, which was higher than the SMT poll projection of 16.5%. The company’s ability to expand its margins highlights improved operational efficiency and cost management, a critical factor in sustaining profitability amid fluctuating market conditions.
In a further boost to investor confidence, Wipro’s Q2 results were bolstered by the announcement of significant large deal bookings during the quarter. The company secured deals worth $1.5 billion, marking the highest total in 10 quarters. These deals are expected to have a positive impact on the company’s future revenue streams, as they strengthen Wipro’s foothold in various markets and industries.
Wipro Announces Bonus Share Issue
Alongside its financial performance, Wipro’s board also made a significant corporate announcement, declaring a 1:1 bonus share issue. This means that shareholders will receive one bonus share for every one share they hold as of the record date, which has yet to be determined. The bonus shares are expected to be credited to shareholders’ accounts within two months of the board’s approval, which is slated for December 15, 2024.
This bonus share issue is Wipro’s first since 2019, when the company offered one free share for every three shares held by shareholders. The upcoming issuance will be the 14th time in the company’s history that it has offered bonus shares. Bonus shares are typically issued to capitalize on a company’s free reserves, increase Earnings Per Share (EPS), and enhance paid-up capital. This move also helps reduce the company’s reserves while rewarding shareholders at no additional cost, often referred to as “free shares.”
To qualify for the bonus shares, investors must purchase Wipro stock before the ex-date, which will be announced in due course. Any shares bought on or after the ex-date will not be eligible for the bonus issuance. This announcement has generated positive sentiment among investors, particularly long-term shareholders who benefit from such corporate actions.
Promoter Holdings and Operational Highlights
As of the end of the September quarter, Wipro’s promoters held a 72.80% stake in the company. This significant stake underscores the promoters’ confidence in the company’s future prospects, particularly as it emerges from a period of sluggish growth.
Chief Financial Officer Aparna Iyer highlighted the company’s operational improvements in the Q2 results. “Driven by operational improvements, we expanded our margins by 35 basis points, and EPS increased by 6.8% QoQ. Our operating cash flow remains strong, at 132.3% of net income in Q2. For the first half of this year, we generated nearly $1 billion in operating cash flow,” she said. This statement reflects the company’s strong cash position, further reinforcing its ability to invest in future growth opportunities and reward shareholders.
Wipro’s focus on operational efficiency has been a key driver of margin expansion, which contributed to its better-than-expected earnings performance. The company’s robust operating cash flow also signals its financial stability, a critical factor in navigating uncertain market conditions.
Stock Performance and Outlook
Despite the positive results, shares of Wipro Ltd. closed 0.65% lower at ₹528.70 following the earnings announcement. However, the stock has gained nearly 11% so far in 2024, reflecting investor optimism about the company’s recovery and future growth prospects. The bonus share announcement is expected to further boost investor sentiment, particularly as Wipro positions itself for sustained growth in the coming quarters.
Looking ahead, Wipro’s outlook remains cautiously optimistic. While the company has guided for flat to slightly declining growth in the next quarter, its strong deal pipeline and improved operational metrics suggest that Wipro is well-positioned to weather near-term challenges and capitalize on future opportunities.
In summary, Wipro’s Q2 results demonstrate a significant recovery after several quarters of decline. With large deal bookings at a 10-quarter high, improved margins, and a strong cash flow position, the company is on a solid footing as it moves into the next phase of growth. The bonus share issuance further underscores Wipro’s commitment to enhancing shareholder value, making it a company to watch in the upcoming quarters.
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