Wipro Ltd (WIT) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to Wipro Ltd. Q3 F526 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded and the duration for today's call will be for 45 minutes. I now hand the conference over to Mr. Abhishek Jain, Vice President, Corporate Treasurer and Head of Investor Relations. Thank you and over to you, sir.

Thank you, Yashashree. Warm welcome to our Q3 FY26 earnings call. We will begin the call with the business highlights and overview by Srinivas Paliya, our Chief Executive Officer and Managing Director. Followed by updates on financial overview by our CFO, Apparna Iyer. We also have our CHRO, Sola Govil, and our chief strategist and technology officer, Hari Shetty, on this call. Afterwards, the operator will open the bridge for Q&A with our management team. Before Shini starts, let me draw your attention to the fact that during this call, we may make certain forward-looking statements within the meaning of Private Security Litigation Reform Act 1995. These statements are based on management's current expectations and are associated with uncertainties and risks, which may cause the actual results to differ materially from those expected. The uncertainties and risk factors are explained in our detailed filings with the SEC. WIPRO does not undertake any obligation to update the forward-looking statements to reflect events and circumstances after the date of filing. The conference call will be archived and a transcript will be available on our website. With that, I would like to turn over the call to Srini.

Thank you, Abhishek. Good evening and thank you for joining us today. a very happy new year to you. Let me start with the broader end. Before walking you through our quarterly performance and how we are positioning for an AI first world. Across our client landscape, one thing is clear. Organizations are reshaping priorities as AI influences how they plan, invest that AI is now a standing board-level mandate led by CEOs who recognize its ability to transform business models, unlock productivity, and create lasting competitive advantage. We are also seeing the same theme continue from past quarters in our deal pipeline. Cost optimization, vendor consolidation, and a clear shift towards AI-led transformation. In quarter three, two important milestones for Vipro. In December, we completed 80 years as a company. And in October, we celebrated 25 years of being listed on the New York Stock Exchange. These milestones reflect a legacy of strong governance, values, and integrity. A foundation of trust that continues to differentiate us with our clients, partners, and... Turning to quarterly performance, our IT services sequential revenue 6.4 billion grew 1.4% on a constant currency basis. Including Harmon DTS acquisition, revenue grew 0.6% for markets and four of our five sectors reporting sequential gains. Americas 1 delivered sequential and year-on-year growth driven by strong performance in healthcare, consumer, and LATAM. Americas 2 saw a sequential Europe growth led by ramp-up of the earlier announced megatons and year-on-year led by India, Middle East, and Southeast Asia. BSSI continued and new wins. Asco revenue was impacted by furloughs, operating margin at 17.6%, expanded 0.4% over adjusted quarter to margin and 0.1% year on year in total contract value and $871 million in large deal bookings. I introduced Viproid is anchored on three strategic pillars, industry platforms and solutions, net oxygen for lending and auto cortex for automotive, streamline operations, improve customer outcomes and open up new avenues. Second, our derivative platforms accelerate AI adoption in the heart of operation. From application management capabilities across the development life, wide coding to model tuning and data pipeline. These platforms help our clients modernize universities and deep tech talent around the world. This ecosystem helps us explore new technologies and build solutions for the future and the Middle East, expanding our network with client GCCs and turn their cost centers into high impact. Let me now share two examples of large deal wins that we had leveraging the global education provider in the UK which is expanding rapidly across markets has chosen us as its strategic partner for a multi-year transformation. The goal is to build a single, secure, intelligent operating model that can scale with their growth and improve their core processes, embed automation, and optimize cost. A leading US-based multi-year transformation, subscription-based wellness model and support global expansion to embed AI and automation across IT infrastructure and core functions, driving efficiency, productivity, and better customer experience. These engagements highlight a clear trend. Clients are bringing us in much earlier and recognizing the step change in the way we deliver and innovate. Harman DTS, a warm welcome to all Harman DTS employees joining us. The acquisition now complete and AI capabilities that truly complement what we do and helps us. as innovation also opens new regions and high-growth industries to take on larger, more complex transformation programs. As our teams come together, we look forward to entering new markets into long-term value, 0% to 2.0% in constant currency for the detailed financials.

Thank you, Srini. Good evening, ladies and gentlemen. I wish you all a very, very happy New Year. Let me share a quick update on the financial performance. Our IT services revenue for quarter 3 grew 1.4% sequentially in constant currency terms and 1.2% sequentially in reported currency. Revenue grew 0.2% year-on-year in reported terms while declining 1.2% year-on-year in constant currency terms. Our constant currency revenue growth numbers included 0.8% as contribution from the Harman DTS acquisition that was closed in quarter 326. Our operating margins for the quarter was 17.6%, an expansion of 40 basis points over the adjusted operating margins for Q2, and 10 basis points improvement on a year-on-year I would also like to highlight that this is one of our best margin performance in the last seven quarters. As we move to Q4, we will need to factor for incremental dilution of harm and DTS. That said, our endeavour, as always, will be to maintain the margins in a similar band as in the last few quarters. Adjusted net income for the quarter was Rs. 33.6 billion and adjusted EPS for the quarter was at Rs. 3.21. An increase of 3.5% quarter-on-quarter and flat year-on-year. Moving on to our strategic market unit and sector performance. All the numbers I will share will be in constant currency. America grew 1.8% sequentially and grew 2.8% on a year-on-year basis. NAICAS 2 declined 0.8% sequentially and 5.2% on a year-on-year basis. Europe grew 3.3% sequentially and declined 4.6% on a year-on-year basis. Apnea grew 1.7% sequentially and 6.6% on a year-on-year basis. From a sector standpoint, DFSI grew 2.6% sequentially and 0.4% year-on-year. Health grew 4.2% sequentially and 1% year-on-year. Consumer grew 0.7% sequentially while declining 5.7% year-on-year. Tech and Comm grew 4.2% sequentially and 3.5% on year-on-year terms. EMR declined 4.9% sequentially and 5.8% year-on-year. To give an added color, Capco was slacked on a year-on-year basis. in Q3. Before I move on to other financial parameters, I would like to draw your attention to two specific one-off charges that we took in our P&L that also impacted our net income. These charges are not included in our IT services segment margin. First is an increase of 302 crores towards Gratuity expenses due to implementation of the new labor code. Second is regarding the restructuring exercise that was completed during the quarter and its impact is about 263 quarts. I'd like to confirm that we have now completed the restructuring we wanted to do and do not anticipate any further charges. Our operating cash flows continue to be higher than the net income and so that 135% of net income for quarter three. Our gross cash, including investments, is now at $6.5 billion. Our net other income in Q3 grew 15% sequentially. Accounting yield for the average investments held in India was at 7.2%. Our effective tax rate at 23.9% for Q326 was better than the same quarter last year of 24.4%. In terms of our guidance, we would like to reiterate what was stated by Srini. We expect our revenue from the IT services business segment to be in the range of $2.635 billion to $2.688 billion. This translates to a sequential guidance of 0-2% in constant currency terms. Our guidance includes the incremental two months of revenue from Harman BTA. It is impacted by fewer working days in Q4 and certain delayed ramp-ups in some of the large deals that we've won earlier in the year. Lastly, I'd like to share with you that in our recently concluded board meeting, the board of directors have declared an interim dividend of Rs. 6 per share. With this payout, the cash distributed to our shareholders during the current financial year will be in excess of $1.3 billion. And we will be able to significantly exceed the minimum threshold that we had laid out in our capital allocation policy for the block ending financial year 2026. With that, I'm going to ask Yashasvi to open it up for Q&A.

Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take our first question from the line of Nitin Padmanabhan from Investec. Please go ahead.

Hello, good evening. Wish me a very happy New Year. I had a couple of questions. So one is, I think this quarter we lost almost $24 million of revenue in energy manufacturing resources. I just wanted your thoughts on that vertical and how do you see the deal pipeline there? When do you think this can sort of turn around? The second is you alluded to some delays in ramp-ups impacting growth for next quarter. So if you could give some color there. I presume this is related to the last deals. By when do you see this sort of beginning to ramp going forward? And third, when are we expecting to have the wage hike cycle? Those are the three.

So Nitin, I'll take your second question. And then on EMR, I'll ask Trini to answer. And on attrition, we have Kaurab here. He can take that. On salary height, sorry. You know, Nitin, in terms of our large deal conversion, you know, each deal is different. One of the significant deal wins we had in Q4 of the last financial year, Phoenix, is now fully ramped up. And its revenues is fully realized and is part of our quarterly performance. So that's on track. Some of the other deals, even the nature of the deals that we've won, we've earlier also highlighted that these deals will take a few quarters to ramp up. So, it's a question of it coming in through the course of the next few quarters. And therefore, we've called it out saying that in Q4, we may not be able to realize the full impact and therefore we're calling it out. The other lever that is playing out is typically furloughs do come back, but Q4 continues to have lower working days, which is not really something offsetting for those furloughs. And therefore, we've given you the guidance we have. But these deals should continue to convert. Each deal is different.

We're confident it will take some time, but it will ramp up. you want to talk on EMR and then follow thanks Apanna happy new year Nitin as far as EMR is concerned our performance in this sector clearly has been impacted based on the macro economic uncertainty we have seen some during tariff related and also some disrupted supply chain continues to and essentially the significant pipeline is that we have good momentum in energy in both Americas and Concerned, that also our Capco business, which is doing some energy consulting side. that's with EMR, More to you, Look at it

this quarter, confirm it.

Perfect. Perfect. That's helpful. Just one clarification. Do you think EMR should start getting back to growth sometime next year? That's the last question for Mayim. Thank you.

So, as far as EMR is concerned, Nathan, I'll just repeat that. One is the pipeline. Like I said, specifically we have good momentum on the pipeline in energy in both Americas and Europe. And as far as manufacturing, I think our focus right now is to convert these deals and then that should drive the revenue growth for us. And we are just staying focused on winning some of those deals.

Perfect. Very helpful. Thank you Thank you.

Next question is from the line of Vibor Singhal from Nuwam Equities.

Please go Yeah, Thanks for taking my question and congrats on performance. So, my question was mainly on the basically the consumer You mentioned challenges in the EMR vertical. Ranking has well for us. The growth was rapid in this quarter. We continue to decline on a by-and-by basis. How do you see the outlook in this vertical? We know this vertical also has been impacted a lot by the direct uncertainty that has basically impacted people's users. But any in your conversation with the clients in terms of our interactions in the pipeline, do you see it turning the corner in coming quarters or do you think it will be sometime before some cavity emerges in this vertical?

Thanks, Vipar. If you look at our consumer sector, clearly, you know, impact on this and also which was put on hold. And, you know, and again, the client is yet to re-initiate. And that is one of the things that is impacting our year-on-year performance as well. However, the overall trend that we see right now is next year for us in consumer. Some of the wins and that should support the growth in this sector. I do not have a, you know, from a quarter four perspective, that's baked into a forecast.

Got it, got it, got it. And similar thing on the basically mighty vertical. I know it's not that big a vertical, but I think both tech and health vertical appear to be doing good. Any specific project ramp up that we saw in this quarter which led to this growth? Or do you think it's a growth which we can sustain in the coming quarters as well?

Sorry, which sector did you refer to Vibho?

Abhanak, tech and the healthcare verticals, both of them, separately.

You know, in some sense, in healthcare, we've been consistently doing well. And we've had a, I said, both in our year-on-year performance. Easily, obviously, we have the open enrollment season that really does improve our health performance in Q3. So, that is also added to the performance. In terms of our tech and com, We've continued to do well in some of our large technology players. And there is a little bit of the harm in acquisition numbers which is also reflected in the overall sectors of formal. And I think communications in general have been better for Europe and apnea. So that's the color I can give you.

Perfect, perfect. That's really helpful. Just one last question from my side. you mentioned about the few headsets in Q4 that you would be facing and if I look at the guidance 0 to 2% at the console level and if we were to extrapolate the 2 month incremental impact of Harman acquisition, the organic growth will probably fall somewhere between minus 1.5 to plus 0.5%. Is that the right understanding and is the reason for that very much as you mentioned in your opening remarks as well?

We're both for some reason we're not able to hear it clearly? Can you just load out your question?

I'm so sorry. Don't give me a second.

Very sorry. Yeah, hi. Can you hear me?

I'm sorry. His line is disconnected. We'll move on to the next question. Before we do that, ladies and gentlemen, to ask a question, please press star and one on your phone. Next question is from the line of Ravi Menon from McQuarrie. Please go ahead.

Hi. Thanks for the opportunity and congrats on a really strong margin performance this quarter. Now that you've come to sequential growth, even in a seasonally week quarter, I'm surprised that organically we seem to be hinting at a slight decline possibly at the lower end of our guidance next quarter. Capco should also be coming out of from the furloughs that it's handed this quarter. So could you talk a bit about that and beyond that, do you think that sequential growth is possible looking at the pipeline and the slight improvement possibly if we have on the demand environment.

So I will ask Srini to talk through the demand environment. You know we guide based on the visibility that we have at the start of the quarter. I've shared with you that some of the furloughs that typically does come back have been partially offset by the lower working days that we are also seeing this year.

And to that extent, we are seeing some softness continue.

But that said, our endeavor would be to, obviously, execute the quarter better through the next 90 days. You want to talk about that?

Thanks, Aparna. So, Naveen, if you look at it, there is no significant change in the demand environment. Specifically, the discretionary spend as the uncertainty continues. Second, January is the time when many of our customers will finalize their budgeting process. We'll have a much better understanding and view of… But having said that, if I look at the pipeline, it's around cost optimization and vendor consolidation, which are the key levers for our clients. And they are using this as a lever for savings, and they want to reinvest these savings into AI capabilities and also, you know, some of the advanced transformation projects that they want to do. For us, we believe this is an optimum opportunity for us to capitalize on this and we'll make strategic bets in each of these sectors. I know continue to invest in our clients for their, you know, to better visibility. You know, like Panna said, there is uncertainty in the market and the customer continue to remain and wait and watch more. So at this stage, our guidance, and if there are any further updates.

Thanks, Srinivas. And Srinivas, you talked about vendor consolidation and cost takeout and clients actually using those savings for transformation. Are they actually giving both to the same vendor, or do they prefer to split that out, what you're seeing, at least in the wins that you have?

So Naveen, it's mixed. There are certain clients who are doing that and, you know, continuing with their current, you know, partners. And there are certain clients who are changing, and there are certain clients who are increasing the scope and using multiple partners as well. So it clearly varies from client to client.

All right, thanks. And one last question on the Harman DTS. You know, which segments do you think this really improves your possibility of win rates?

So, Navin, if I understand the question, how the Harman DTS acquisition will help us, right?

Correct, yeah. Which sectors do you expect the win rates to improve?

So, clearly, Harman brings in both, you know, design to manufacturing capabilities and, you know, AI-powered product innovation. In that context, clearly, the sweet spot for a combined unit, especially the engineering global business line that we have, is the tech and comm sector. That's, I think, primarily the one where we see a significant opportunity. And the other three sectors I would pick are health, consumer, and EMR, Naveen.

Thanks so much. Thank you.

We'll take our next question from the line of Sandeep Shah from Equirus Securities. Please go ahead.

Yeah, thanks. Thanks for the opportunity. Just the first question is, because of delay in ramp-up of deal bins of the last two, three quarters, is it fair to assume if those ramps up in the first quarter next year, then the seasonal softness which generally comes in the first quarter may not be true next year.

Yes, in some sense that will be the objective that we ramp up enough so that we can expect for some of the weakness that could arise. That said, we don't guide for Q1. But we would like to clarify that it's just delayed and some of those do take time to ramp up and And I'm confident that it will ramp up and we will keep you posted.

Okay, okay. Just, Apana, I wanted to understand the guidance on the margins, which you said narrow band. Narrow band compared to Q3 margins or earlier range?

So, you know, again, no, we don't guide for margins. You've seen our performance over the last eight quarters. We've consistently improved, right? But I think, you know, all credit to the team, we have been fairly resilient on margin. And we will continue our endeavor to keep it. But that said, we will have to invest for growth. And that's the number one priority, right? We've acquired ETS Harman. And, you know, that will make an incremental dilution to our margins that we will have to absorb. Two, you know, we continue to chase and win large deals, and they come with a different margin profile. And these are very important investments we'll have to make. And, you know, there will also be decisions that will have to be made on wage increases that Saurabh spoke of. Another moving part, our endeavor is going to be to make sure that we keep it in that band of 17% to 17.5%. If you recall, we have said that while we stated that band with the acquisition, we will see pressure to that. Right now, we are continuing to hold that band, which itself is a positive. But like I said, we will have to take it quarter to quarter. There will be some quarters where we will have to invest in our people, in our deals, in our clients, and for growth. So, we will make those trade-offs.

Yeah, this last couple of questions. The deal TCV in this quarter, both on large deal and total, has been slightly softer versus very strong momentum in the earlier three quarters. So, any reason where is it declined, vision making being slowed down or it's the intense comparative pressure which has led to some decline in the win ratio? And the last question.

Yeah. You know, typically, like I said, you know, some of these deals, they tend to club, right? We are contesting a lot of large deals. They are in the cycle. We are hopeful of closing them. You will continue to see the momentum on large deal wins. At a billion dollars, or maybe we're just shy of $100 million, that's been the normal trajectory. Obviously, in the first half, we had a few mega-deal wins, so to be specific, we hope to win more, right? So I wouldn't read into it in terms of lower decision-making cycle or competitive pressure. I would just say that they tend to lump up. We have a lot of good deals and we will see the momentum pick up.

Okay. And this is the last question, Apana, with the war chest of $6.1 billion, though we are distributing dividend, but is it fair to assume that buyback continues to remain one of the options in the mine to give this excess cash back to the shareholders?

We have said that buyback will continue to be a means by which we will return cash to our shareholders. It's certainly an option on the table, and we will consider it at an appropriate time.

Okay, thanks and all the best.

Thank you. Next question is from the line of Kumar Rakesh from BNP Paribas.

Please go ahead. hi thank you for taking my question I have just one question do you think given the kind of mix which you have both of vertical and the capability at you would be able to get back in line with the industry average revenue growth or would it make sense to just slow down your margin get to make this sort of a margin be able to better compete with some of your peers as well or maybe acquire some of the companies to reset the mix. What's your thought on that?

Kumar, clearly, first, if you look at our inorganic strategy, it's very clearly aligned to the strategic priorities we called out. We constantly look for sectors and the markets combination in terms of where we need to invest, where we need to acquire new capabilities. And if you look at specifically Harman DTS, clearly it's giving us a combination of both what I would call as capabilities and also a few new markets that they're already in. We continue to look at opportunities to move forward. Our strategy is both growing our organic and inorganic and continue to invest in our inorganic. and you are right, we do have cash and as far as that is concerned is an opportunity for us to look at the market scan the market and do the right investment that makes it a win-win for us Thanks a lot for that.

Thank you Next question is from the line of Rishi Junjanwala from IIFL.

Please go ahead Yeah, thanks for the opportunity. Just wanted to understand you know X of Harman doesn't look like there would be you know much of a sequential growth in 4Q and you know 1Q as we were discussing earlier in the call historically has had some weak seasonality you know I noticed a pretty sharp increase in our overall headcount in this quarter so just wanted to understand given you know the outlook for the next couple of quarters what is driving this and you know how do we read that count for this quarter is primarily driven

from two things. One is the acquisition, DTS acquisition and second is one of the large deals and dealings we had done as well rebadging of people. So I think when we ramped up the deal. So that's been the reason for seeing the ramp up in this quarter. Otherwise from a hiring standpoint and supply side I don't see a challenge attrition has been at 2% low for the quarter, spending the same in the next quarter. We are going to go to the campuses again. We have just taken a bit of a atus in this quarter, next quarter. So from a supply side, relation is looking up in that of the furloughs which we are out of the need people have taken. Very confident in the headcount supply side to manage the demand.

The second question is just wanting to understand this restructuring cost that we have booked in our financials.

Is it in the same nature as what you know we did in 1Q and if not if you can give some color around that Structuring basically pivoted on obsolete skilled fits and turned in two areas, one is in Europe where we have a tough labor loss and second is in Capco these are the two big areas where we did that similar to what we had done in Q1.

Understood and just last thing there was a bookkeeping question there is a spike in dna in this quarter any particular reason and is that a normalized level going forward as well thank you uh you know we have taken a provision for bad in the full day charge and i think that's the line item that will show an increase that's in the usual course of business you should see that go off starting next uh quarter uh i was asking about depreciation and monetization Okay.

And, you know, typically we do assess the intangibles every year. And if, you know, based on the expected forecast, etc., sometimes we tend to accelerate such amortization. In this quarter, we did accelerate some amortization towards one of the earlier acquisitions and that's reflected. And that should also normalize. However, we will have an increased amount of interest in charge coming in for the DTS Harman. So, So, you should wait for the next quarter to get the Harman license.

Sure, sure. Got it. Thank you so much.

Thank you. Thank you. Next question is from the line of Kavaljit Saluja from KOTAC Security. Please go Kavaljit, can you use your hand? Your audio is not very clear.

Is it better now?

Yes, please go ahead.

Hi, Aparna. I have just a couple of questions for you. First is that at $6.5 billion, it seems like you have plenty of excess cash. So how do you intend to flush this excess cash out? Would it be through dividends or is buyback on the cards? If buyback is on the cards, then what are the considerations, you know, set, required to move towards that path? That's the first question.

You know, you're right. We did note that we've been having excess cash, and as a result of that, you know, last year we had increased our capital allocation, and we said that we would start increasing our dividend payouts. We did that. we paid out Rupees 6 in the last financial year. This year, we've almost paid 11 rupees per share, which is about $1.3 billion, which should, you know, nearly account for, like, you know, if I had to just annualize our YTD EPS, it was about 88-89% of that. So, at least what the increased dividend is doing is we're not adding to the excess cash and leaving enough for, you know, watches for whatever acquisitions and organic investments we need to make. Is buyback an option to still consider in terms of returning excess cash to shareholders? Indeed it is. And what are the considerations for that? You know, we will have a discussion with the board on that and we will come back. Typically, considerations include, you know, whether we have enough net cash available in order to pursue the investments we need. And we will keep the market posted, covered. But other statutory considerations are quite in the place for buyback.

Can you repeat that last part again? I missed it here.

Oh, I said, you know, there are some statutory considerations that, you know, you can't do a buyback within 12 months. You know, you can't do it if there is a merger pending for NCLT, et cetera. None of that is, I mean, all of that is conducive.

Okay, so let's say if you had to theoretically decide to do a buyback, today you can do that. Whereas in the past, there was an NCLT process, a merger, which would have acted as an impediment. There is no such impediment. I mean, you can do that as and when you feel it's the right time. Is that the way to look at it?

Yes.

The second question is for you and Srini. Let's say if those two mega DEs ramp ups were not delayed, then what would the guidance have been for the March quarter. Any way to detail it out, either quantitatively, which may be difficult, or even qualitatively, that would be very helpful to understand the growth rate.

You know, obviously, we can't talk about it quantitatively, Kamal. And qualitatively, like I said, it's only delayed. These ramp-ups should happen. And each deal is different in its nature, right? For example, something like Phoenix, which was entirely net new, And fully, you know, where there was a clear go-live date and readiness, we've been able to do that, and that's fully into our revenue starting Q3. So, that's played out perfectly to plan, right? Now, in some of the other larger deals, mega deals that we could be winning in terms of vendor consolidation, these typically have both an element of renewal and new. Obviously, the renewal is fully in, and that continues, and we're not seeing any changes in terms of the expectations. In case of the new, the element of new, some of these things are taking longer, either due to client situations where there could be some changes in the client environment that they're going through, and therefore there is a little bit of a delay in terms of the timing of the ramp-up. or it could just be the nature of how it is going to play out, right? Because, you know, we will have, it will take six quarters, that's what I earlier alluded to. So it is going to take that time. And we're hopeful that this will flow through in the coming quarters.

Noted. And thank you so much. All the best.

Thank you. Thank you, Kabbalah.

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to Mr. Abhishek Jail for closing comments. Over to you, sir.

Thank you all for joining the call. Have a nice day.

Thank you, members of the management team. On behalf of Wipro Limited, that concludes this conference. Thank you for joining us and you may now disconnect your line.