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Wipro is the latest technology company to surprise the Street with better than expected numbers. The company's dollar revenues, which imply how the company has actually fared operationally, during the second quarter have grown by 2.7%. The dollar revenue growth has surprised the market because it is at least 50 basis points ahead of the market's estimates. This is the best revenue growth clocked by the company is more than seven quarters. The company's says that its strategy of focusing on its top clients and the front end is yielding results.
The company has signed 45 new clients during the quarter and one large multi-year deal with a leading banking and financial services company in the United States. Wipro has also won a large multi-year contract with a leading bank in the United States and the integrated IT and BPO deal further enhances Wipro’s capabilities in the payments technology and payments processing domain, the company says. The company expects the uptick in the banking and financial services space to continue as discretionary spends are on the rise. Wipro's optimism is reflected in its guidance for the third quarter as well. The company has guided for a revenue growth for its IT services to be in the range of $1660 million to $ 1690 million. This guidance implies a sequential revenue growth of 1.8-3.6%, which is achievable.
It's not just the topline growth that has positively surprised the Street. Wipro's EBIT margins are up 250 basis sequentially to 22.5%. Some of this margin expansion has been driven by a 60 basis point fall in the sales and general administration expenses, explains Dhananjay Sinha of Emkay Global. Sales and other expenses have dropped 60 basis points to 12.4 of sales during the second quarter. Apart from this, margins have also been impacted positively by the 11% fall in the rupee during the quarter. Gross margins are up 180 basis points to 34.8% quarter-on-quarter.
The market is viewing this quarter's performance as a clear turnaround as the traction in growth is visible across verticls and geographies. For instannce, while Wipro's core market has shown growth, Asia Pacific and emerging markets have grown at 6.3% sequentially (in dollar terms), which implies that the company's go-to-market strategy is working.
