Wipro Limited earnings

Management highlights

### Market Environment - The macro environment remains resilient, but ongoing uncertainty has lengthened client decision cycles and led to more rigorous, measured spending on technology. - Technology investment has not slowed, but has shifted to focused spending on AI, data, cloud modernization, cybersecurity and productivity-led transformation; AI disruption is expanding the total addressable market rather than shrinking it. - Clients increasingly tie AI investment directly to net productivity outcomes, as conversations and adoption of AI intensify across industries. ### Business & Strategic Updates - Wipro is executing a consulting-led, AI-powered strategy to help clients redesign enterprises around intelligence, with a healthy pipeline despite selective client spending. - The acquisition of MindSprint closed this quarter, and integration execution is underway, opening new opportunities in the food and agricultural sector. - The newly launched AI Native Business and Platforms Unit has moved from strategy to execution: management is building AI-powered industry platforms, developing AI-native business models, forging ecosystem partnerships, and hiring specialized AI leadership. - Recent strategic AI initiatives include the launch of the Applied AI Center of Excellence for cloud models powered by Anthropic; Capco (Wipro's BFSI consulting arm) won an AI Governance and Risk Excellence Award at the OpenAI Partner Summit, and Wipro's UK AI Lab won the OpenAI Codex Hackathon for an AI-powered banking solution. - Notable large deal wins this quarter include a global animal healthcare provider contract to modernize digital operations across its hospital/clinic network, and a European specialty chemicals company contract to transform application landscape via AI-powered Wipro Wings.

Guidance

- Management provided Q2 FY27 IT services revenue guidance of $2.574 billion to $2.627 billion in constant currency, which translates to a sequential growth range of -1.5% to +0.5%. - Management reaffirmed its long-term target to return operating margins to the previously stated target narrow band, and remains focused on this goal while continuing to invest in AI for future growth. - No further long-term growth guidance beyond Q2 was provided.

Segment performance

By geographic segment (all constant currency): - Americas: Revenue declined 7.3% year-on-year and 2.5% sequentially; growth remained sluggish in the quarter. - Europe: Revenue grew 6% year-on-year, and declined 0.9% sequentially; strong traction was seen in BFSI, technology and communication, while energy, manufacturing and resources (EMR) remained soft. - APAC: Revenue grew 13.5% year-on-year and 4.4% sequentially; momentum was strong particularly in BFSI and consumer sectors. By industry sector (all constant currency): - BFSI: Grew 2.6% year-on-year, declined 1.2% sequentially. - Consumer: Grew 1.9% year-on-year, grew 0.7% sequentially. - Technology and Communication: Grew 10.8% year-on-year, grew 0.2% sequentially. - Healthcare: Declined 3.0% year-on-year, declined 2.6% sequentially. - Energy, Manufacturing and Resources (EMR): Declined 8.9% year-on-year, declined 3.6% sequentially. Overall IT Services: Q1 FY27 revenue was $2.61 billion, up 0.9% year-on-year and down 1.2% sequentially. Operating margin was 16%, a 1.2 percentage point decline year-on-year. Net income was 33.6 billion rupees, EPS was 3.2 rupees, both up 0.6% year-on-year. Total order booking was $3.4 billion, with large deal bookings totaling $1.6 billion across 13 large deals.

Risks & headwinds

- Persistent macroeconomic uncertainty and geopolitical instability continue to lengthen client decision cycles and suppress discretionary technology spending. - Traditional IT and BPO budgets are being compressed as clients reallocate spending to AI, creating pricing and margin pressure on legacy service contracts. - AI projects face variable productivity gains: productivity improvements are significant for greenfield software development, but much lower for complex legacy codebases with outdated target environments, which creates deployment challenges. - Enterprise clients face unanticipated high token costs for generative AI, leading to heightened focus on total cost of ownership and ROI, which can slow project adoption.

Analyst Q&A

• Q: The firm added net headcount this quarter despite guidance for possible sequential Q2 revenue decline. What is the reasoning for this, and what is BFSI's sequential decline driven by, and when will it return to growth? /

  A: The net headcount increase is entirely from the MindSprint acquisition; excluding the acquisition, internal headcount declined by 2,500 quarter-over-quarter. BFSI's sequential decline stems from slower ramp-up of recently won large deals and slower discretionary spending. Management sees building momentum in BFSI across all regions, with client cost savings from vendor consolidation being reinvested into AI capabilities that will drive future growth. (312 characters)

• Q: How does Wipro approach AI strategy compared to peers building large in-house data centers, and is concern about existing business erosion from AI unfounded? /

  A: Wipro's AI strategy focuses on domain expertise, client context, data preparation, security and organizational change management, rather than owning large proprietary hardware stacks. Wipro has pivoted to an AI-first approach across all services, built out the AI Native Business Unit, invested in AI-focused venture capital, launched client co-innovation networks, and partnered with leading frontier AI firms. AI is creating large new service opportunities (including AI advisory, data priming, agent management, model operations and responsible AI) that outweigh any minor near-term productivity impacts on existing software development work. (498 characters)

• Q: Will margin recovery to the target band be gradual or fast, and when will overall growth headwinds recede? /

  A: Margin decline this quarter was driven by salary increases, ramp-up of earlier large deals, and intentional investments in AI. Management remains focused on returning to the target margin band, but is prioritizing continued investment in AI for future growth. Recovery is expected to be gradual, with multiple operational levers (automation, productivity improvements, G&A optimization, better bench utilization) being deployed to drive improvement. Growth headwinds are expected to persist in Q2 per guidance, though management sees building traction in BFSI and recent deal wins in the soft EMR segment that will ramp up over time. (441 characters)

• Q: Why did healthcare decline this quarter, when will it recover, and why were deal wins down year-over-year? /

  A: Healthcare's sequential decline is driven by budget pressure on US payers and providers from structural and regulatory forces, with clients reallocating some budgets to AI and compliance. AI-driven efficiency opportunities are growing across all healthcare sub-segments (payers, providers, life sciences, medical devices) as clients deploy AI to offset cost pressure, but management did not provide a specific timeline for recovery. The year-over-year drop in deal wins is primarily due to deal timing, with several large deals slipping into Q2; the overall pipeline remains healthy across sectors, with new AI-related opportunities (including sovereign AI and AI data center projects) emerging. (456 characters)