Last Updated: January 13, 2023, 10:42 AM IST
Wipro’s IT services revenue is seeing weakness from European capital markets, retail and manufacturing sectors amid recessionary fears, says a brokerage. (Photo: Shutterstock)
Wipro’s Q3 revenue growth is likely to be lower as compared with TCS’s 2.2 per cent, Infosys’ 2.4 per cent and HCL Tech’s 5 per cent
After TCS, Infosys and HCL Tech, Wipro is the fourth big IT company to declare its Q3 financial results on Friday after market hours. Analysts said the firm is expected to register a 1 per cent growth quarter-on-quarter (QoQ) in revenue in constant currency (CC) terms, which will be in line with the management’s guidance of 0.5-2 per cent.
Wipro’s Q3 revenue growth is likely to be lower as compared with TCS’s 2.2 per cent, Infosys’ 2.4 per cent and HCL Tech’s 5 per cent.
Analysts at Kotak Institutional Equities said, “Weak consulting, high furloughs and slowdown in Europe are partly to blame.” They also said that while overall EBIT (earnings before interest and tax) margins are expected to rise by 104 basis points sequentially on rupee depreciation, IT services EBIT margin might remain flat around 15.1 percent. Headwinds include a two-month wage hike impact and high furloughs.
Nirmal Bang Institutional Equities said, “Margins might have bottomed out but will not hit the medium-term target even once in any quarter of FY23 and possibly even in FY24 because of heavy investments in talent and capabilities, and some slowdown in the macro economy.”
Investec Securities said the company’s IT services revenue is already seeing weakness from European capital markets, retail and manufacturing sectors amid recessionary fears. Thus, it expects revenue growth guidance of (-)1 per cent to 1 per cent for the January-March quarter (Q4 FY23). Analysts expect total contract value to also be lower than $725 million clocked in Q2 FY23.
ICICI Direct said, “The company had given 0.5-2 per cent QoQ CC growth guidance for Q3. Due to the higher furlough impact this year, we bake in revenue growth at the lower end. The company is expected to report 1 per cent QoQ CC revenue growth in Q3 while dollar revenue growth is expected to be 0.7 per cent QoQ, after factoring in 30 bps cross currency headwinds.”
Emkay said, “We expect EBIT margin of IT services to expand by 40bps sequentially on account of operational efficiencies, employee pyramid rationalisation, and rupee depreciation, negating the full quarter impact of the salary hike.”
Key Things To Watch Out For In Wipro Q3 Earnings:
-Impact of macro headwinds on demand
-Q4 FY23 guidance and FY23 outlook
-Attrition and hiring trend
-Updates on core geographies
-Measures to increase margins above 17 percent
-Performance of acquired companies like CAPCO.
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