Wipro's Q3 Earnings: Revenue Dip Expected Amidst Market Jitters
Wipro Stock Under Pressure Ahead of Q3 Results
Wipro's stock experienced a notable downturn as investors reacted to concerns surrounding the company's anticipated Q3 financial results. Shares of the technology firm fell by over 2% on the Bombay Stock Exchange (BSE), marking it as one of the day's poorest performers. This decline reflects market apprehension about Wipro's revenue performance for the quarter.
Q3 Revenue Forecast: A Potential Decline
Market analysts anticipate that Wipro's revenue may contract during the third quarter, while its EBIT margins are projected to remain relatively stable. While the successful acquisition of large deals is expected, seasonal slowdowns are likely to impact the overall revenue figures.
Wipro's Share Performance
As of the latest trading update, Wipro's shares were valued at Rs 282.15, a 2.05% decrease on the BSE. The company's market capitalization stands at Rs 2,95,406.44 crore. The stock price has fluctuated between a 52-week high of Rs 319.95 and a low of Rs 208.40.
Analysts' Predictions for Wipro's Q3
Brokerage firm IndSec forecasts a quarter-on-quarter revenue decline between -1% and -0.5% for Wipro, citing seasonal weaknesses in consulting, specific client-related problems, and industry-specific softness. They also anticipate a minor decrease in EBIT margins due to weak revenue growth and the impact of wage hikes. IndSec expects positive revenue growth for the next quarter. The focus will be on senior management retention, margin improvements, and the new CEO's strategic direction.
Kotak Institutional Equities also predicts a revenue dip of 0.6% on a constant currency basis, attributing this to seasonal weakness and furloughs, which offset the benefits of large deal ramp-ups. They forecast stable EBIT margins at 21.2%. Kotak notes that the company's focus will be on the actual contract value (ACV) of deal wins. Furthermore, the brokerage expects Infosys to revise its revenue growth projection for fiscal year 2025.
Key Factors for Investors to Monitor
Investors should pay close attention to several factors:
- The level of discretionary spending across different sectors, particularly financial services.
- The results of clients' annual budget planning.
- Senior management turnover.
- Strategies to improve margins and the timing of wage increases.
- The structure of revenue, especially the contribution from third-party product sales.
Previous Quarter Performance: Mixed Results
During the second quarter of fiscal year 2025, Wipro announced a consolidated net profit of Rs 3,209 crore, a substantial 21.25% year-on-year and 6.85% quarter-on-quarter increase. However, consolidated revenue declined by 0.95% from the previous year. In dollar terms, the IT services segment's revenue was $2,660.1 million, a 1.3% increase quarter-on-quarter and a 2.0% year-on-year decrease.
Q3 Revenue Guidance: A Narrow Range
For the quarter ending December 31, 2024, Wipro has projected its IT Services business revenue to be between $2,607 million and $2,660 million. This translates to a sequential revenue guidance of -2.0% to 0.0% in constant currency terms.
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