Why Wipro’s Stock Has Moved Down After Q2 2023 Earnings

Wipro’s stock has fallen by 3-4% after the company reported its Q2 2023 earnings on October 18, 2023. There are a few reasons for this decline:

• Revenue growth missed expectations: Wipro’s revenue for Q2 2023 grew by 9.3% year-on-year to Rs 22,560 crore, which was slightly below analyst expectations of Rs 22,700 crore. (Wipro Q2 FY24 earnings press conference: Source)

• Margin contraction: Wipro’s operating margin for Q2 2023 contracted by 1.5 percentage points to 15.1%, which was also below analyst expectations. This margin contraction was due to a number of factors, including higher employee costs, travel expenses, and other costs associated with the company’s growth initiatives. (Wipro Q2 FY24 earnings press conference: Source)
• Weak guidance for Q3 2023: Wipro guided for revenue growth of 1-3% in Q3 2023, which was also below analyst expectations. This weak guidance was due to a number of factors, including the ongoing war in Ukraine, high inflation, and a potential slowdown in global economic growth. (Wipro Q2 FY24 earnings press conference: Source)

Highlights from Earnings Report

Despite the stock price decline, there were some positive highlights in Wipro’s Q2 2023 earnings report:

• Strong order growth: Wipro’s order book grew by 27% year-on-year to Rs 23,000 crore. This strong order growth was driven by demand for Wipro’s digital transformation services and cloud computing solutions. (Wipro Q2 FY24 earnings press conference: Source)
• Broad-based growth: Wipro’s revenue growth was broad-based across all major geographies and verticals. This suggests that the company is well-positioned to benefit from the ongoing digital transformation trend. (Wipro Q2 FY24 earnings press conference: Source)
• Healthy balance sheet: Wipro has a healthy balance sheet with net cash of Rs 20,000 crore. This strong financial position gives the company the flexibility to invest in its growth initiatives and acquire new businesses. (Wipro Q2 FY24 earnings press conference: Source)

Future Outlook

Wipro’s future outlook is mixed. On the one hand, the company has a strong order book and is well-positioned to benefit from the ongoing digital transformation trend. On the other hand, the company is facing headwinds such as the ongoing war in Ukraine, high inflation, and a potential slowdown in global economic growth.

Overall, Wipro is a well-managed company with a strong track record of growth. However, the company is facing a number of challenges in the near term. Investors should carefully consider these challenges before making any investment decisions.