Wipro, HCL Tech Q3 FY24 results, a mixed bag

Indian IT services majors Wipro and HCL Technologies on Friday announced their Q3 results ended December 31, 2023.  
 
Wipro reported a 12% year-on-year (YoY) decrease in net profit at ₹2,694 crore for the quarter. This marks the fourth consecutive quarter of declining profits for the company. Consolidated revenue was ₹22,205 crore, down 4.4% YoY for the quarter.  
 
The decline in revenue was mainly due to the ongoing weakness in the banking, financial services, and insurance (BFSI) vertical, as well as the company's significant exposure to consulting during a period of reduced discretionary spending. 
 
The Bengaluru-headquartered company also revised its revenue growth guidance for the quarter ending March 31, 2024. It expects revenue from the IT services segment to be in the range of $2,615 million to $2,669 million, with a sequential guidance of -1.5% to +0.5% in constant currency terms. Its total bookings for Q3 FY24 reached $3.8 billion, a slight increase of 0.2% quarter-on-quarter (QoQ), while large deal bookings amounted to $900 million. 
 
Thierry Delaporte, CEO and managing director of Wipro, expressed optimism about AI as a revenue generator. He said that AI is now integrated into most of the company's existing solutions and client offerings under the ai360 strategy. Wipro is also deploying AI internally across all business and functional areas to improve efficiency, productivity, and scale. The company believes that these investments will enable them to capitalise on emerging opportunities as the macro environment improves. 
 
Notably, Wipro’s total headcount declined for the fifth consecutive quarter by 4,473 employees in the October to December 2023 period, taking the total workforce strength to 240,234 as compared to 244,707 at the end of the September 2023 quarter. However, the attrition level continued to ease to 14.2% for Q3 to a 10-quarter low. The company's board has declared an interim dividend of ₹1 ($0.0121) per equity share/ADS, which will be paid on or before February 10. 
 
Meanwhile, HCL Technologies reported better-than-expected revenue of ₹28,446 crore for the quarter ended December 30. The company's consolidated net profit increased by 13.5% to ₹4,350 crore compared to ₹3,832 crore in the previous quarter (Q2FY24). Its consolidated revenue from operations also rose by 6.65% to ₹28,446 crore, as per the company's BSE filing. 
 
The Noida-headquartered company also announced an interim dividend of 600%, or ₹12 per equity share of ₹2 each, for the Financial Year 2023-24. The payment date for the interim dividend is set for January 31. 

The company's headcount was up by 3,617 in Q3FY24, with attrition hitting an all-time low at 12.8%. The company too reduced revenue growth guidance for full year FY24 from the previous quarter at 5-6 % YoY in constant currency terms to now 5-5.5%. 
 
The third quarter is typically a weak period for IT companies due to the holiday season in the US and Europe, which are the largest markets for Indian firms. Furloughs and fewer working days often impact performance during this time. 
 
Despite the revenue drop, Biswajit Maity, Senior Principal Analyst at Gartner, said that both Wipro and HCL demonstrate strong vision and transformation capabilities. He told TechCircle that Wipro maintains strong customer trust and a robust business pipeline, which should contribute to positive growth in the upcoming quarters.  
 
“CIOs are persistently concentrating on multi-year investments in digital transformation, which is anticipated to result in increased spending on IT services in general, possibly achieving double-digit growth, as observed at present,” he said.  
Likewise, HCL's recent increase in earnings was expected due to a mega deal they signed.  It has expanded its operations alongside major cloud service providers, establishing specialised units and promoting a culture of open innovation and collaboration, said Maity. 
 
On Thursday, India's top two IT companies, Tata Consultancy Services (TCS) and Infosys, posted muted growth and revenue in Q3FY24. TCS reported a 2% YoY increase in net profit to ₹11,058 crore for the quarter ended December 31, 2023. Meanwhile, Infosys recorded a 7.3% YoY decrease in net profit at ₹6,106 crore in the third quarter of FY24.