Wipro shares gain 5% as Q2 results beat expectations; brokerages divided

Wipro Q2 results impact: Software company Wipro shares surged up to 5.34 per cent to hit an intraday high of Rs 557.05 per share after Q2FY25 results met Street expectations. 

However, Wipro's American Depositary Receipts (ADRs) settled 1.42 per cent lower at $6.26.

In Q2FY25, Wipro reported a consolidated profit attributable to owners of Rs 3,208.8 crore, marking a 6.85 per cent increase quarter-on-quarter (Q-o-Q) from Rs 3,003.2 crore in Q1FY25. Revenue also saw a modest growth of 1.5 per cent Q-o-Q, rising to Rs 22,301.6 crore from Rs 21,963.8 crore in the previous quarter.

On the operating side, earnings before interest and tax (EBIT) grew by 1.3 per cent Q-o-Q to Rs 3,672.5 crore, up from Rs 3,625.2 crore in Q1FY25. However, EBIT margin slightly decreased to 16.47 per cent in Q2FY25, compared to 16.51 per cent in the previous quarter.

Srini Pallia, CEO and managing director said, “Based on strong execution in Q2, we met our expectations for revenue growth, bookings, and margins. 

In the IT services segment, revenue reached $2,660.1 million, representing a 1.3 per cent Q-o-Q increase but a 2.0 per cent year-on-year (Y-o-Y) decrease. Non-GAAP constant currency IT services revenue showed a 0.6 per cent Q-o-Q rise and a 2.3 per cent Y-o-Y decline.

Total bookings for the quarter were $3,561 million, with large deal bookings totaling $1,489 million, reflecting a considerable 28.8 per cent Q-o-Q and 16.8 per cent Y-o-Y increase in constant currency.

Voluntary attrition stood at 14.5 per cent on a trailing 12-month basis.

Additionally, Wipro’s Board of Directors recommended a bonus share issuance to shareholders (including a stock dividend to ADS holders) in a 1:1 ratio, pending shareholder approval.

“We continued to expand our top accounts, large deal bookings surpassed $1 Bn once again, and Capco maintained its momentum for another consecutive quarter. We grew in three out of four markets, as well as, in BFSI, Consumer and Technology and Communications sectors. We will continue to invest in our clients, our strategic priorities, and building a strong AI powered Wipro,” Pallia added.

Wipro Q3FY25 Outlook 

The company expects revenue from the IT Services business segment to be in the range of $2,607 million to $2,660 million. This translates to sequential guidance of (-) 2.0 per cent to 0.0 per cent in constant currency (CC) terms. 

Considering these factors, here’s what brokerages are saying about Wipro's Q2FY25 results:

Nomura

According to Nomura analysts, Wipro reported a solid Q2FY25 performance, with revenue reaching $2,660 million, reflecting a 0.6 per cent Q-o-Q increase, which surpassed consensus estimates and was near the upper end of its guidance. 

The BFSI vertical continued its positive trajectory with a 2.7 per cent Q-o-Q growth, while Energy & Utilities and Manufacturing experienced declines due to project closures and specific client issues. The IT Ebit margin improved to 16.8 per cent, above expectations, and EPS grew by 21 per cent Y-o-Y to INR 6.12.

Looking ahead, Wipro has guided for Q3 revenue growth of -2 per cent to 0 per cent Q-o-Q, influenced by seasonal factors such as furloughs. Despite these challenges, the company’s deal pipeline remains robust, with large deal wins totaling $1.5 billion. Thus, analysts at  Nomura have maintained a ‘Buy’ rating with a target price of Rs 670, anticipating Ebit margin improvements in the medium term.

Emkay

Those at Emkay said that Wipro’s operating performance in Q2 was better than anticipated, with revenue growth of 0.6 per cent Q-o-Q CC, marking the highest growth in the last seven quarters. 

The focus on cost reduction and modernisation, analysts believe, is evident, but guidance for Q3, projected at -2 per cent to 0 per cent Q-o-Q, disappointed due to seasonal and regional challenges.

As a result, Emkay revised its FY25-27 EPS estimates downward by 0.4 per cent to 2.3 per cent, maintaining a "Reduce" rating with a target price of INR 550.

Motilal Oswal

Motilal Oswal analysts highlighted Wipro’s Q2FY25 results, which showed IT Services revenue of $2.6 billion (up 0.6 per cent Q-o-Q), exceeding their estimates. The Ebit margin was reported at 16.8 per cent, indicating strong operational performance. The order intake increased to $3.6 billion, with large deals reaching $1.5 billion, reflecting a major Q-o-Q rise.

Despite a 2.3 per cent revenue decline for 1HFY25, Ebit and PAT grew, leading to a projected 3.0 per cent CAGR in IT Services revenue from FY24 to FY27. 

Therefore, Motilal Oswal analysts have raised FY25 EPS estimates by 2 per cent while maintaining a ‘Neutral’ rating, setting a target price of Rs 500, considering the current valuation as fair.