Wipro Ltd

NSE:WIPRO

Earnings Call Analysis

Wipro's Q1 Performance Highlights and Outlook

Wipro reported Q1 IT Services revenue of $2.63 billion, a 1% decrease sequentially in constant currency, in line with guidance. Operating margin increased slightly to 16.5%. Americas 1 saw growth of 0.4%, but other regions like Europe and APMEA were softer. Large deal bookings remained strong at $1.2 billion. For Q2, Wipro guides a revenue range of -1% to +1% in constant currency. Despite a challenging market, Wipro continues to invest in AI and talent, showing optimism for bouncing back.

Introduction and Company Overview

In the first quarter of the financial year 2024-2025, Wipro Limited has been navigating a cautious market environment. The company’s leadership, including CEO Srinivas Pallia, shared insights on their strategic priorities, financial performance, and the macroeconomic factors influencing client behavior. Clients have remained cautious, leading to muted discretionary spending, a sentiment echoed in the broader IT services sector.

Financial Performance

Wipro reported IT Services revenue of USD 2.63 billion for Q1, a sequential decrease of 1% in constant currency terms. Despite the revenue decline, the company managed to improve its operating margin to 16.5%, a modest increase of 0.1% from the previous quarter. The net income stood at INR 30 billion, growing 6% sequentially, with an EPS of INR 5.75, representing a 10% year-on-year growth. This performance outlines a robust financial management strategy even amidst revenue challenges.

Regional Performance

The Americas showed mixed results; while the Americas 1 region experienced sequential growth of 0.4% driven by health and technology sectors, Americas 2 saw a decline of 0.7%. However, the BFSI segment in Americas 2 grew by 1.4%, and year-on-year bookings in this region rose by 12.1%, suggesting potential for recovery. Europe and APMEA (Asia Pacific, Middle East, and Africa) faced significant sequential declines of 1.4% and 4.2% respectively, indicating continued softness in these markets.

Sectoral Insights

The sector performance varied significantly. The Banking and Financial Services sector maintained positive momentum with a 0.5% sequential growth, bolstered by deal flow. The consumer business also saw a sequential increase of 1.6%. However, the manufacturing sector and the energy and utilities sector continued to face headwinds, showing sequential declines of 3% and 6.3%, respectively. This divergence underscores the mixed recovery across different industry verticals.

Strategic Priorities and Deal Wins

Wipro emphasized its focus on five strategic priorities: prioritizing large deals, strengthening relationships with strategic clients and partners, and developing AI-powered industry solutions. The company secured 10 large deals in Q1, contributing to a total contract value (TCV) of USD 3.3 billion, with large deal TCV at USD 1.2 billion. Highlighted deals included a 5-year contract with a U.S.-based communication services provider and a significant win in the automotive sector.

Guidance and Outlook

Looking forward, Wipro has provided Q2 guidance for a sequential revenue growth of -1% to 1% in constant currency terms. The company expressed confidence in maintaining operating margins within a narrow band with an upward bias. Wipro aims to capitalize on the momentum in BFSI, consumer business, and new large deals, while addressing challenges in the demand environment and specific sectors like manufacturing and E&U.

Challenges and Opportunities

Despite a challenging macroeconomic environment, Wipro remains optimistic about its long-term prospects. The company is leveraging advancements in Generative AI (GenAI) to infuse productivity and efficiency across its operations and client engagements. The integration of Capco and Rizing is also expected to yield stronger client-centric solutions, particularly in BFSI and consulting-led transformational deals.

Conclusion

Wipro’s performance in Q1 FY 2024-2025 reflects a cautious yet strategically adaptable company. The firm’s focus on operational rigor, client relationships, and technological advancements positions it to navigate the uncertainties of the current market environment. Investors should watch for how Wipro translates its strategic priorities into sustained revenue growth and margin improvement in the coming quarters.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Wipro Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Dipak Bohra, Senior Vice President, Corporate Treasurer and Investor Relations. Thank you, and over to you, sir.

[Dipak Bohra, executive]

Thank you, Yashashree. A warm welcome to our quarter 1 financial year '25 earnings call. We will begin the call with the business highlights and overview by Srinivas Pallia, our Chief Executive Officer and Managing Director; followed by updates on financial overview by our CFO, Aparna Iyer. We also have our CHRO, Saurabh Govil, on this call. Afterwards, the operator will open the bridge for Q&A with our management team.

Before Srini 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 Securities Litigation Reform Act of 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.

[Srinivas Pallia, executive]

Thanks, Dipak. Hello, everyone. Thank you for joining me and my leadership team for our first quarter results for the financial year 2024-'25. For these past 90 days, I have traveled across our markets, meeting clients, employees and engaging with partners and stakeholders. With each conversation, my appreciation of our business has deepened and my confidence in our team has grown stronger. It's truly inspiring to witness the trust our clients have placed in Wipro.

Additionally, I've been able to hone the focus of our five strategic priorities that I shared with you last quarter. I will provide you with an update on this shortly. But let me first start with the financial highlights for the quarter. In quarter 1, we did not see a significant shift in the demand environment. Clients remain cautious, and our discretionary spending continue to be muted. Our IT Services revenue for quarter 1 was USD 2.63 billion, reflecting a sequential decrease of 1% in constant currency, which was within our guided range for the quarter. Operating margin was 16.5%, an increase of 0.1% over the last quarter.

Let me now provide you with some color on how our SMUs performed in quarter 1 and our industry sectors. I will begin with Americas 1, which delivered a sequential growth of 0.4% in quarter 1. You may recall that Americas 1 had a good year in financial year 2024, with the health and technology sectors leading the way. We now see momentum in consumer and communication sectors also. Americas 2 had a sequential decline of 0.7%, but BFSI performed well, achieving a sequential growth of 1.4% in quarter 1. With a year-on-year growth of 12.1% in quarter 1, bookings in Americas 2, we are optimistic about returning to growth in this market in the medium term.

In quarter 1, we also maintained positive momentum in our Capco business, achieving a sequential growth of 3.4%. However, Europe and APMEA remained soft for us with sequential declines of 1.4% and 4.2%, respectively. Our pipeline in Europe remains healthy, and our primary focus there will be on improving conversion. We are reviewing our strategy for APMEA, and we'll keep you informed of our progress in the upcoming quarters. Among industry sectors, we had varied performance. Banking and financial services retained its positive momentum from last quarter, and we have now seen growth in this sector for 2 consecutive quarters. This sector grew 0.5% sequentially in quarter 1. Driven by deal flow, the consumer business grew by 1.6% this quarter. However, manufacturing and energy and utilities sectors continued to show weakness for us, experiencing sequential decline of 3% and 6.3%, respectively. Moving to order booking. Our overall bookings TCV for the quarter was USD 3.3 billion with large deal TCV of USD 1.2 billion.

Now let me update you on the progress we have made on the five strategic priorities that I outlined last quarter. One, if you recall, we discussed prioritizing large deals as a clear area of focus. We are driving large deal creation systematically across our client base. We are shaping these opportunities by proactively engaging with influencers and partners. As a result, our pipeline for large deals remain robust. Once again, we had a quarter where our large deal bookings exceeded USD 1 billion. Our success in securing 10 large deals in quarter 1 was a key factor that made this possible.

Let me call out two of the deals that we signed in quarter 1. The first is with a U.S.-based communication services provider, where we were chosen for a 5-year contract to provide managed services for select products and building industry-specific solutions. You've already heard about this in the media. The second win is in the automotive segment in manufacturing. A U.S.-based OEM has selected us to streamline their global infrastructure services. We will develop a solution leveraging both automation and AI to improve user experience and reduce operating costs.

Number two, our next area of focus, which I had called out is to strengthen our relationships with our major clients and strategic partners. We are investing in our established strategic accounts and high-potential accounts. Our focus will be on these clients within our priority sectors and markets we have defined internally. We will further strengthen our capabilities in consulting, delivery and solutioning in these accounts. In addition, we are actively collaborating with hyperscalers and strategic partners to co-innovate and develop unique propositions for our clients. In fact, I would like to emphasize that even in an otherwise soft demand environment, our revenue from top 10 accounts have grown 1.3% sequentially and 3.8% year-on-year in constant currency terms.

Another key priority I had previously highlighted is to develop AI-powered industry and cross-industry solutions using a consulting-led approach. Clearly, our goal here is to help clients transform their business and operating models using the power of AI. We are also actively strengthening and accelerating our industry consulting capabilities to support this. We continue to build cross-industry solutions that will deliver value to clients across our horizontal plays. Let me give you two examples of our recent wins in quarter 1. In the health care sector, we have been selected by a leading U.S.-based health solutions company to help them comply with CMS guidelines. Our consulting-led, AI-powered industry solution will seamlessly integrate CMS provisions into billing and various other processes. This will simplify prescription cost management for all the members. Moving on to the second example. We are collaborating with a leading financial services company in North America to develop a GenAI-powered assistant for wealth management to help portfolio advisers.

Let me now shift to our next area of focus, which is building talent at scale. Our goal at Wipro is to attract, nurture and grow a diverse talent pool. We have ramped up our upskilling efforts across various practices, covering both emerging and core technology areas. In fact, during quarter 1, we rolled out iAspire, an AI-powered career development platform. iAspire offers personalized learning pathways and needs in the career progression for each and every one of our employees. We have already provided foundational training to over 225,000 of our employees, and an additional 30,000 employees have received advanced AI training. With Wipro as Client Zero, we are utilizing our in-house AI expertise to develop GenAI solutions across all units and functions within the company. We believe this will help us boost not only the capabilities of our employees but also make Wipro GenAI ready.

And finally, we are driving execution rigor with speed, helping client-centricity and delivery excellence. We are focused on nurturing innovation in our delivery capabilities by investing in our Lab45 AI platform and the Wipro enterprise GenAI Studio. In fact, we are also incorporating various GenAI tools throughout our software development life cycle to enhance both the productivity and quality of our deliveries.

In closing, I would like to say this. The initial plan is both challenging and exciting. I'm pleased with the momentum we have built in quarter 1. Across the company, I have noticed a fresh energy and renewed dedication towards achieving our goals. With the commitment and passion of our 230,000-plus employees across the world, I firmly believe we will seize market opportunities at offers, and we'll continue to progress steadily one step at a time.

Now on to guidance. As we move into quarter 2, we do believe that we are now in a better position compared to the start of quarter 1. For quarter 2, we are guiding for a sequential revenue growth of minus 1.0% to plus 1.0% in constant currency. We are confident that we can sustain our margins within a narrow band with an upward bias in the coming quarters.

With that, let me turn it over to Aparna for a detailed overview of our financials. Thank you. Over to you, Aparna.

[Aparna Iyer, executive]

Thank you, Srini. Hello, everybody. Let me quickly summarize the financial highlights for Q1 '25, post which we can open it up for questions. Our IT services revenue declined 1.2% sequentially in reported currency terms, which is a 1% decline in constant currency terms. This is well within our guided range for Q1. We are also pleased to share an expansion in our IT services margins of 0.4% year-on-year and 0.1% quarter-on-quarter. We delivered 16.5% margins on the back of a tough revenue environment and even after continuous investments in talent, improved utilization, fixed price productivity and optimization of overheads have been the key levers at play. We expect to gain from the tailwinds of our operational rigor and are confident of being able to operate in a narrow band with an upward bias. We generated yet another quarter of strong cash flows. Our cash flows of $479 million in Q1 is at 132% of our net income. With this, our current investments and cash balance now stands at $5.4 billion. Our other income, net of finance expenses, grew by 21% quarter-on-quarter and year-on-year. Our accounting yield for average investments held in India in Q1 was at 7.6%.

Our net income at INR 30 billion grew 6% sequentially and our EPS for the quarter at INR 5.75 grew 10% year-on-year. In terms of other key metrices, our ETR is at 24.5% for Q1 versus 24% in Q1 '24. Our hedges continue to be in line with our policy. We had about $3 billion of ForEx derivative contracts as hedges at the end of Q1.

Finally, I would like to reiterate the guidance for Q1. We expect revenues from our IT services business segment to be in the range of $2.6 billion to $2.652 billion. This translates to a sequential guidance of minus 1% to a plus positive 1% in constant currency terms.

With that, we can open up for Q&A.

[Operator]

[Operator Instructions] We have our first question from the line of Abhishek Bhandari from Nomura.

[Abhishek Bhandari, analyst]

Srini, my first question is on the quarter gone by. Most of the peers who have reported were kind of positively surprised by the execution during the quarter. While we have reported a number which is within the [ band ], but it's towards the lower end. So was there any incident in terms of negative surprises for you? Or you think your Q1 performance was in line with what you had anticipated at the start of the quarter?

[Srinivas Pallia, executive]

Thanks, Abhishek. Abhishek, the first point I want to talk about is we did give a quarter 1 guidance range, and we were within that guidance range. That's number one. Second, like I said, we're still not seeing a significant change in the demand environment. We see clients still cautious and discretionary spend is low. However, we have seen uptick in Capco, BFSI, consumer business in the U.S., which I called out. Sectors like E&U and manufacturing has been soft for us. Outside of the U.S., we are yet to see momentum build up in our other 2 SMUs, specifically Europe and APMEA. We are also still in early stage of the deal that we have signed, and deals like this usually take few quarters to realize its full potential. And that's where our quarter 2 guidance is between minus 1% to plus 1%.

[Abhishek Bhandari, analyst]

Got it. My second and last question is on the telco deal, what you won in Q1. Is this due for full ramp-up in Q2? Or there will be a staggard ramp-up between Q2 and Q3?

[Aparna Iyer, executive]

Yes, Abhishek. Like Srini said, these deals typically take some time to ramp up, and it will take a few quarters for it to realize its full revenue potential. Of course, some upside is factored in the quarter 2 guidance.

[Operator]

Next question is from the line of Gaurav Rateria from Morgan Stanley.

[Gaurav Rateria, analyst]

Srini, first question is on deal wins. Would you be able to provide some color on how average tenor has changed versus last few quarters? And also, has there been any change in the new versus renewal mix in the current quarter versus last few quarters?

[Aparna Iyer, executive]

I'll go first, and then, Srini, you can add. See, we don't share that mix between new versus renewables, but you know that the large deal that we had announced was net new. So that should give you some color. On your point on tenure of deal wins, we do see that the TCV bookings continue to be signed for longer tenure. Some of it is also a portfolio of what we win, but that continues to go up, is something that we've noticed, Gaurav.

[Srinivas Pallia, executive]

So just to add to that, Gaurav, deal tenures are definitely becoming shorter. 3-year to 5-year deals are becoming more commonplace. The only deals where tenures exceed 5 years includes optionalities and clients agree only when cost savings are front-loaded with potentially financial engineering involved.

[Gaurav Rateria, analyst]

Got it. Second question is on how are you thinking about implementing GenAI in your internal software development from a delivery point of view? And could you share some color on initial results that you might have seen across different service lines?

[Srinivas Pallia, executive]

Thanks, Gaurav. GenAI is very exciting. And from my perspective, there are three ways where we are deploying GenAI. First, number one, like I said, as Wipro is a Client Zero, we are actually implementing GenAI across various process areas within Wipro across all the units. In fact, it's -- we are helping, for example, in the HR segment, the whole employee experience, if you will. Second, the iAspire that I talked about, we launched. It's about how do you build careers for our employees. They define what career, what path they want to take and what kind of training programs that we can apply to them in the context of GenAI. And so those are the things that we're already doing. And this will -- this is also helping our teams kind of build more capabilities and competencies in GenAI. It's also helping Wipro to be really truly a GenAI-ready company.

Second, Gaurav, is that in fact, if I have to really talk about some examples, one of the things that we have done is [ WeNow ]. It's actually a conversational digital assistant of interacting with the various corporate systems. As of today, we had almost 7.4 million queries resolved in IT, HR and policy, and it has almost touched, I think, 230,000 users. What excites me is the fact that 80% favorability rating from our employees, that actually is significant.

Another one which I'm really excited about is Eliza, which is AI-powered sales assistant, which is supporting almost 3,000 sales force across the globe for us. So there are multiple what I would say GenAI-related solutions that we are implementing within Wipro. I tell people that you got to drink your Kool-Aid first, and I'm very excited that the employees are bringing in so much out there with the GenAI.

As far as the clients are concerned, Gaurav, there are three components to it. One is how do we deploy GenAI in the context of software development life cycles, right? We all heard of GitHub Copilot. So how do you not only improve the productivity but also improve the quality? In that, if you ask me both on the coding side and also on the testing side. And this, to me, Gaurav, it is -- it will continue to improve as we move forward. And there is an excitement across our clients and our own employees deploying this. So thereby, we can improve the productivity and quality.

The second part is how do you infuse GenAI into managed services, both on the infrastructure side and also on the process side? I think that's one area that we are constantly looking at and how to -- how can we leverage GenAI, again, from a productivity and also experience for our clients. The third piece, Gaurav, what we are trying to do. Like I talked about, the industry solutions, cross-industry solutions that we are building, right? I talked about the telecom. I talked about the OEM manufacturing. I talked about health care. I also talked about wealth management in the context of financial services. These are all AI-powered industry solutions, which are consulting-led.

So a combination of knowing the domain aspects of the client, understand the technology landscape of the client becomes very critical and more so, data. So we are also able to help the clients in the context of their entire data strategy, data governance and how do you leverage the enterprise data within a reliable and secure way and implement GenAI. And I feel very excited because of the deals that we have won, and now we are out there to execute them. And some of these can be replicated across, Gaurav.

[Gaurav Rateria, analyst]

Last question for Aparna. What has been driving the depreciation and amortization down for last 2 quarters? And you did talk about margin in a narrow band with an upward bias. So what would be the levers going forward?

[Aparna Iyer, executive]

Yes. I think the depreciation and amortization expense doesn't really have anything that's very particular for me to call out. Perhaps a couple of quarters back, we may have had some acceleration of amortization of a particular intangible. But other than that, I don't think there are any one-offs to call out for Q1. Levers at play, like I said, will continue to be the fixed price productivity improvement in our pyramid.

Saurabh has spoken about onboarding pressures. We did a good number in Q1. And as we build our muscle on that, that will bring down the cost of delivery. The optimization of overheads is something that we've done in the context of declining revenues, it's very critical for us to shed weight and remain lean and efficient, and that's something that we are doing. There is also some synergies to be realized as acquired entities come into the larger Wipro fold administratively. So these are all levers that can help us as we look at our margins in the future. I hope that answers.

[Operator]

Next question is from the line of Abhishek Kumar from JM Financial.

[Abhishek Kumar, analyst]

Srini, first question on Capco. Some of your peers have also indicated green shoots in BFSI, especially around discretionary short-cycle spend. Have you seen in Capco expansion of the areas where Capco has been winning deals from what you're doing maybe a couple of quarters back?

[Srinivas Pallia, executive]

Abhishek, thank you for the question. First and foremost, I did talk about Capco having a sequential growth in the last couple of quarters. And our growth has come in across Europe and Americas, and we are also looking at Asia Pacific as of it. For us, Capco is like tip of the spear, which is consulting and strategy led, and then the rest of the Wipro engine actually implement that. So we are seeing a good traction around that, and we are seeing greater demand at a larger institutional clients across the banks and some of the -- and financial services companies. So to me, what I would say, Abhishek, is this gives you a little bit of color to how the discretionary spending is coming back, at least in the banking and financial services. And it's also reflected in our BFSI growth, right, sequentially as well.

[Abhishek Kumar, analyst]

Sure. [indiscernible] energy and utility, this vertical has been unusually soft for us, while we have not seen that for any of our peers. So any more color on what is driving softness? Is it client specific? Are we losing out to peers in the consolidation scenario? Any color here? And how do we see this going forward?

[Aparna Iyer, executive]

Yes. So Abhishek, we lost you like for 10 seconds. Did you mean E&U?

[Abhishek Kumar, analyst]

Yes. Energy and utility, yes.

[Aparna Iyer, executive]

So I'll go and then maybe, Srini, if you want to add something. See, in E&U, we've had some end of large programs. And as a result, we have seen some softness in that industry vertical. We got a good pipeline, which we need to convert, and it has been perhaps something that has been softer for Wipro as compared to what the market has been. Srini has spoken about both industry-specific and cross-industry service offerings that we have. We particularly bolstered our presence in E&U. In fact, even Capco has a decent presence. That's something that gives us a lot of -- and Capco is doing pretty well in that space and especially in the Americas. So we are seeing some bounce back there on that count. But we have some work to do. We've got a good set of service offerings that we need to win at the marketplace.

[Srinivas Pallia, executive]

Thanks, Aparna. See, oil and gas is one of the areas where Capco actually has the consulting capabilities, that's number one. Second, we are also building GenAI-powered solutions. For example, we call it as [ Blue Skies ], which is actually autonomous monitoring to detect flare and smoke in degassing stations. And we are getting good traction in some of the clients because we want to actually lead through a specific business problem that our clients are facing. And in fact, this particular one, there was 80% reduction in efforts, response time to some of the two events. And so this is what our strategy will be going forward in the context of oil and gas. Like Aparna said, energy and utilities for us, because of some of the large projects coming down, has been soft in quarter 1. And that's why you're seeing the sequential degrowth.

[Operator]

Next question is from the line of Sandeep Shah from Equirus Securities.

[Sandeep Shah, analyst]

The first question Srini, Wipro being the first one to call out green shoots, especially selectively in Capco, financial services, health care. And directionally, the growth is expected to improve versus fourth quarter being a flattish growth versus this quarter, at least it should have shown the trend of upward trajectory versus actually a minus 1% kind of a growth. So what -- is it surprised you negatively? Or is it more Wipro specific rather than external factors and which you believe can be rectified going forward?

[Aparna Iyer, executive]

So Sandeep, I'll go first and, of course, Srini will add. We guide based on visibility that we have. There are puts and takes. There are parts of the businesses where we are seeing momentum. And like you rightly said, we remain authentic and true, and we share with you proactively where we're seeing some of the discretionary spends come back. And true to that, I think Capco is one place where we've seen now 3 quarters, it is bouncing back quite broad-based. We've spoken about how Americas 1 has had a continued growth momentum. We spoke of health care doing well. And this quarter, we've seen acceleration of momentum in consumer and telecom in Americas 1.

If you look at Americas 2, we've said that BFSI or BFS have done well in Americas 2 as a sector, and we are seeing a sequential growth there of 1.4% and the bookings have been strong. And those are things that we have shared with you very clearly. The places where we see softness is Europe and APMEA. And our guidance is actually a combination of both the pluses and minus that we are seeing at the moment. Srini also said that we're entering Q2 with a little bit more confidence than what we did at the start of Q1, right? So we'll have to take all that into consideration, Sandeep.

[Sandeep Shah, analyst]

Yes, yes. Fair enough, fair enough. And Srini, just wanted to understand, is there any time line which you believe by that time, we could be in a full execution mode and the restructuring changes will start delivering the results, which have been aspired to under your strategic direction?

[Srinivas Pallia, executive]

Sandeep, at this point in time, I'm not calling out the time line. Our focus is to execute our quarter 2 guidance. Having said that, Sandeep, we have called out five strategic priorities. I did talk about the progress we made in each of these strategic priorities. I think what we need to do is to bring in that execution rigor with speed, we need to delight our customers, focus on delivery excellence and all the operational metrics that Aparna talked about. We need to continue to focus on building large deals, growing our large clients, continue to build or invest into our building skills within Wipro.

I talked about iAspire, which is very exciting for the employees as we speak. And we will continue to invest in industry-specific solutions, which are powered by AI, consulting-led and also cross-industry solutions that are horizontal. I did talk about four wins in this segment, one was in telecom, one was in manufacturing, one was in health care, other one more on the wealth management within banking and financial services. That gives me comfort on two areas. One, I think our initial strategy is picking up momentum with our clients; second, these things can be replicated across as well, Sandeep. And the skill set we are building is someone with people who can execute to this as well.

[Sandeep Shah, analyst]

Okay. Fair enough. And last question, Aparna. This quarter, there has been a significant shift towards the on-site, which has increased by 2 to 3 bps versus that the minus 1% revenue growth. Is it fair to assume the volume growth or volume decline could be even higher than the headline revenue decline? And in that scenario, even the margin has actually been very good in terms of execution and employee cost has gone down despite the on-site effort, which could be because of the rationalization and the decline in the employee is happening. So just wanted some clarity on this.

[Aparna Iyer, executive]

Thank you for the question, Sandeep. I want to bring to attention that we've integrated a few of our entities. And as a result, which were more on-site specific. So I don't know if they are directly comparable between Q1 and last Q4 in terms of the on-site mix. But everything else that you've said is also true that our employee compensation cost continues to go down because of our focus and a concerted action around productivity and making sure you're able to deliver to a cost that we would like to, given where our revenues are. So there is a lot of focus around it, and all levers are being flexed on that count. So we are not becoming more on-site-centric. It's a metric which may not be directly comparable. But going forward, now that it's in the base, it will be. A couple of our on-site-centric subsidiaries have now got integrated. That's one of the reasons why you're seeing it. But costs are of course comparable, and everything else that you set up stays good.

[Operator]

Next question is from the line of Ravi Menon from Macquarie.

[Ravi Menon, analyst]

Congrats on good execution on the margin side. So I wanted to ask you about how you're thinking about improving the growth momentum? Want to take an approach where you invest upfront. One of your peers, [ where there's been ] a senior change, they've taken an approach to completely disregard, I think, near-term margins and try to focus on growth first and then thinking that margins will come later. Do you agree with that? Or what do you think we need to do to accelerate Wipro's growth?

[Aparna Iyer, executive]

We've spoken about profitable growth as being our focus. Srini has spoken about it, and that remains. Our margins have continued to expand because of the operational rigor. This is something that we've been doing over the last 6 quarters, and we continue to march on, on that. Of course, one of the reasons why we believe that we will hold margins in a narrow band with an upward bias is also because we want to be -- make sure that we're having enough room for us to invest for growth. And you can be assured we won't hold back on our investments for growth. That remains the #1 priority. I've also said that in Q1, we invested in our employees as well. We covered a few of our employees under the long-term incentive stock options. So that's also coming. So we continue to invest in our people, in our employees, in our associates. And we will continue to invest for growth, everything that Srini has spoken about, we will continue to invest in them.

[Ravi Menon, analyst]

Right. And related question on this, the customer tiers. We've seen that in the [ 75 million-plus ] tier, there has been a drop off of 3 customers quarter-on-quarter. Year-on-year, it's still up by 1. But just wanted to understand, if I look at -- it's not even dropped down to the [ 50 million-plus ] tier but that is down by 2. So are we still seeing some pressure with even the largest clients in terms of spending? Are there still cutbacks in projects?

[Srinivas Pallia, executive]

So Ravi, if we look at our client base, the top 10 clients have grown, top 25 clients have grown. And there are certain clients where you have seen a little bit of a shrink. It's also to do with the discretionary spend, which have been a little bit slow in coming. Having said that, Ravi, the strategy for us is we want to invest in our top accounts. We also want to invest in the future top accounts. And then I clearly called out the investment will be at an account level where you're actually bringing the right solutions, right delivery and the consulting-led aspects of it. And that will be the journey for us. A few here and there, I'm not too worried Ravi, but what's important is how our top clients are marching forward in terms of growth for us.

[Operator]

We have our next question from the line of Nitin Padmanabhan from Investec.

[Nitin Padmanabhan, analyst]

Aparna and Srini, I think you had mentioned that the top 10 have grown around 1.3%, top 20 to 25 had grown around 1%. So obviously, it looks like the drag has been from the smaller customers. Are we still cutting tail accounts? Or is this just a broad-based kind of decline that we're seeing? Or any color that you could give us in terms of what you're seeing on that side of things? And what do you think will be the drivers for improvement there?

[Aparna Iyer, executive]

I think our strategy on tail accounts consolidation is nearly towards the end. And I -- at least this quarter, I don't think that's the compelling reason for the decline. It was more specific to APMEA, more specific to sectors like India, Middle East, where we had a long tail of clients, and we felt it was important for us to make the clients fewer but go deeper. We are happy with the place where we are. We have executed on that. The decline that you're also seeing is also a reflection of the lower discretionary spends and the decline that the company has seen overall and therefore, it reflects in a few client buckets like you mentioned. We remain committed to growing our top 100 clients, and you should take assurance on the growth that you're seeing from our top 25 like Srini said. There's nothing more that I need to add on that.

[Nitin Padmanabhan, analyst]

Sure. Perfect. And lastly, on the BFSI side. So well, we have been very early in calling this out, and it's worked out pretty well. What exactly is the current drag that you're seeing? Any specific subsegments where you're seeing a little more pain? Because related to the others, although we called it out earlier, the relative growth is slightly softer. So is there any specific subsegments which is, call it, causing a little more pain for us?

[Aparna Iyer, executive]

Yes. So I think BFSI Americas is generally doing better compared to Europe. Asia Pacific has also done well. So that's the color from a market standpoint. I think Europe has been slightly softer [indiscernible].

[Srinivas Pallia, executive]

So Nitin, Srini here, just to add a little bit more color to what Aparna said. In the context of BFSI, I think we are seeing a secular growth both in Europe and Americas that I talked about, both in quarter 1 and quarter 2. And since you asked a specific where we are seeing that, with Capco being the tip of the spear in some of the aspects of the clients across the risk and compliance, across cost optimization and of course, some of the business transformation that clients are doing it. Capco is actually leading the charge for us, and Wipro is actually becoming more on the implementation side. And that's also coming together, Nitin.

[Nitin Padmanabhan, analyst]

Sure, super. And the way you see things today -- just my final question. The way you see things today and the way things are sort of evolving, and you look at the environment in terms of elections maybe in the second half. Are you seeing clients basically sort of talking of trying to close in some execution early on considering there could be some level of uncertainty in the end? Or that's not a right characterization of what you're seeing?

[Srinivas Pallia, executive]

I like the word, Nitin, uncertainty, right? The macro environment today is definitely not really as predictable. The political situations varies. But also there are certain good news from the Fed in terms of -- could be a good news from the Fed in terms of the rates and also the inflation aspects of it. So it's kind of a mixed bag, Nitin, as we speak. But where we are focused is how do we execute on quarter 2, especially in the context of the range that we gave you and also the deals that we have in the pipeline, how do we convert them? I think that's the focus we're going to drive, Nitin.

[Operator]

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

[Kumar Rakesh, analyst]

Srini, my first question was for the last 4 quarters, the magnitude of Q-o-Q revenue decline was coming down. And then in this quarter, we have seen the decline has increased again. This was despite the strength in BFSI that the industry has seen, and you have relatively similar or higher exposure in that vertical. That shakes the confidence in the recovery that we were hoping that at some stage should start kicking in. From your commentary that you have made about the large deal wins that you are winning, some of the larger ones are actually in that new and the strong deal pipeline you have. Some of your peers have also spoken about how the deal to revenue conversion now is improving. Do you think you have reached a stage that you can at least say that sequentially from hereon, Wipro should start seeing improving revenue growth? And if not, then what is holding you back?

[Srinivas Pallia, executive]

Kumar, I will not comment how our growth will be beyond quarter 2, the guidance that we've given. But having said that, Kumar, I want to call out a few things, right? We are not still seeing a significant change in the demand environment. There is caution from our clients and discretionary spend is low. However, like I called out, we are seeing an uptick in Capco, we are seeing an uptick in BFSI, and also talked about consumer business in the U.S. But the sectors like E&U and manufacturing, specifically for us, has been soft.

And if you look at outside of Americas 1 and Americas 2 while they are building the momentum, the other 2 market units, which are specifically Europe and APMEA, we have seen a sequential decline. And in the context of large deals, some of the deals we are in the early stage. Some of them are net new, are in the early stage, we have signed. And I presume that it will take a few quarters for us, and Aparna did talk about some component being taken in quarter 2 and quarters ahead. I would say that would be my summary for your question, Kumar.

[Kumar Rakesh, analyst]

My second question was more of a clarification. So last month, Airbus came out with a profit warning. And since then, we have seen a couple of Europe-based IT services, some of the services companies issuing their own profit warning as well, cutting their guidance. Does our manufacturing weakness has anything to do with that? Or do you think any of that has any implication for Wipro?

[Aparna Iyer, executive]

No, not really. All what you mentioned really is not impacting us. In fact, like Srini mentioned, we've -- we have a good pipeline. We won a good deal for us. This is about our own conversion of the pipeline that we have. And I don't think the companies you mentioned or the profit warnings there have had anything to do with the softness that we've experienced.

[Operator]

We have a next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.

[Sudheer Guntupalli, analyst]

Yes. And just perplexed with a set of comments from your side would seem to be contradicting each other. On one side, we are saying that for the last 3 quarters, we are seeing an uptick in Capco, which is consulting/discretionary heavy, and that is not necessarily translating into a very strong growth at the BFSI level or it's the overall company level, which I think some of our competitors have reported almost 7.5% to 8% sort of sequential revenue growth in BFSI in this quarter. So if you were to give us a cut on if Capco within BFSI is doing well, what is not doing well? I understand the geographical slicing and dicing you gave earlier. But any specific color on if you're facing any client-specific issues or any corporate action-related impacts, so on and so forth, that would be helpful.

[Aparna Iyer, executive]

Sudheer, I think let me summarize all the comments that we made. For us, we were the first to call out the momentum coming back in Capco in Q3. Q3, Q4, Q1, I think we have 3 dots of Capco doing well, both on bookings and a revenue standpoint. I think they've grown upwards of 3% sequentially. The momentum looks good for Q2. And within Capco, we have a secular growth. Maybe there are some pockets of Continental Europe that are weak. But other than that, they have a broad-based bounce back.

BFSI outside of Capco, Americas 2 certainly is bouncing back. We've had some good wins with a few large regional banks and we are accelerating momentum, and things look to be in a better shape there, right? On the Europe BFSI outside of Capco, we are seeing some softness, which we have shared with you. It's a combination of a lot of things you have said, along with the macroeconomic environment being weak and lower discretionary spend.

[Sudheer Guntupalli, analyst]

And Srini, if you can, is that related -- in any way related to the corporate action that's going on between a couple of large European banks by any chance?

[Aparna Iyer, executive]

No. I don't want to call out anything specific. It's a combination of multiple factors. It's not really just one client or so.

[Sudheer Guntupalli, analyst]

Sure. And the other question is it looks like we are now completely integrating Capco and Rizing on our books, if I were to understand one of the prior responses that we had given. Is that correct understanding?

[Aparna Iyer, executive]

No, it's not. They're always integrated. They're fully consolidated. That's not what I meant. I meant, in terms of just the bringing together the larger, perhaps the functions and the facilities and the optimization that you have by bringing perhaps to organizations closer, that's what I meant, including maybe integration of like the systems and the IT systems and the people, cross-pollination of talent, things like that. But they're fully integrated, they're fully consolidated, yes.

[Sudheer Guntupalli, analyst]

Yes. No, I was asking because earlier, one of the concerns a few quarters back was that if they are deeply integrated, then probably the go-to-market positioning of the Capco and Rizing, we'll have to see a bit of a reset. So I'm just thinking as to whether that concerns are completely addressed now.

[Srinivas Pallia, executive]

So one other thing that we see is both the teams are actually leveraging the complementary capabilities, especially in the context of transformation deals, Sudheer. I think the collaboration between both Capco and Wipro's business have yielded strong origination and also significant number of synergy deals. This is also evident where we are jointly entering some of the new financial services market, especially in the APMEA region specific to Middle East and India and domestic. And the advantage we have here is, like I said, Capco is the tip of the spear, right? And the areas that I called out, whether risk and compliance, whether it's to do with cost optimization or the transformation of the bank or the customer experience, right, I think it's a very good partnership between Capco and Wipro.

Sorry, I forgot to mention Rizing. As far as Rizing is concerned, Sudheer, if you look at the Rizing, they are very strong and dominant on certain industry segments, for example, fashion retail, right? So the way we are doing it here is that -- or SAP HANA. So whenever there's a large transformation program, the clients are looking at us sort of bringing the consulting capabilities of Rizing, along with the delivery and execution capabilities of Wipro together. And that's why we're able to win some of the transformational deals, specifically in SAP, and we are seeing a good traction there.

[Operator]

We have our next question from the line of Manik Taneja from Axis Capital.

[Manik Taneja, analyst]

While some of my questions have already been answered, I just wanted to quiz you on the segmental margin performance, especially with regards to Europe and APMEA margins while you've spoken about some of the revenue [ challenge ] in that geography. If you could help us understand what's driven the margin decline in those geographies, that's question number one. And the second question was with regards to the financial services performance in Europe. With some of the leadership changes in Capco and even at the company-wide level, is that also creating some drag for the financial services business in Europe for you?

[Aparna Iyer, executive]

Okay. So I'll take your second question first. I want to like allay your fears fully. The Capco leadership is fully stable, and it's doing really well. Srini alluded to it, where he said, the collaboration is deeper, better and we -- the secular growth is back. So I don't think there is absolutely anything to do with that. The softness in Europe is actually outside of Capco. And actually, even though we were doing well on synergy deals, there are some softness that is coming, both due to the macroeconomic environment, the lower discretionary spend and a few client-specific issues as well, right? So it's a combination, and I'll leave it at that.

The first question on segment margin, yes, there is a decline in both Europe and APMEA. Actually, APMEA has improved year-on-year, but Europe has actually declined year-on-year. And what you will see in the segment is that our unallocated costs have come down substantially between Q4 and Q1. We've changed the methodology in which we absorbed some of these group costs. And therefore, their costs are being spread to the market units. So therefore, you're seeing a decline to be a little bit more excessive, more deeper than it should be. But Europe, the weakness in margins is again linked back to our revenue performance. And nothing more to add on that. APMEA actually is doing better year-on-year, and perhaps someone in the IR can give you more details.

[Operator]

We'll take the last question from the line of Girish Pai from BOB Capital Markets.

[Girish Pai, analyst]

Aparna, the commentary on margins, it's moved from a narrow band to a narrow band with an upward bias. I'm seeing that being introduced for the first time. So what's leading to that?

[Aparna Iyer, executive]

I think we've been able to execute on a bit-by-bit improvement over the last 6 quarters. The tailwind of the operational rigor gives us the confidence as we get into Q2. There is also -- you must note that the guidance that we have given for quarter 2 is also perhaps amongst the better guidance range that we have given in the last 6 quarters. So all of that adds to the confidence as we look at quarter 2 and beyond.

[Girish Pai, analyst]

And upward bias could be a 50 to 100 basis point upward bias?

[Aparna Iyer, executive]

I think it's very -- that's why you should read it along with narrow band and with an upward bias.

[Girish Pai, analyst]

Okay. Last year, you pushed the wage hike, I think, by about 3 months. Would we see the same cycle this year? And the quantum, would it be pretty similar?

[Srinivas Pallia, executive]

Salary hikes, last year, we've done it in December. We have not decided when to give the salary hikes. We decided in this quarter. But it will be in line with the market whenever we decide.

[Girish Pai, analyst]

Okay. My last question has to do with competitive intensity. And one of your larger peers was discussing that it was giving out fairly large productivity gains back to customers in areas like BPO and testing and stuff like that because of Generative AI. Is that what you're seeing in the market a heightened competitive intensity because of GenAI?

[Srinivas Pallia, executive]

So Girish, like I said, clearly, we have a strategy for GenAI. And I talked about the three places where we're doing it. So whenever we put a solution to the client, all the deals that we have, we leverage GenAI. So what goes to the client is GenAI-powered solutions, if you will. And we are also infusing like I said, GenAI, into some of the engagements that we have with our clients. So that will be the combination of the two. So GenAI does help us in terms of productivity. Some of -- so to me, this kind of trend is not new. There will be always -- in the context of bidding and risky deals, there will be some companies who will try to pick up deals at an extremely low margin or extremely high risk. But those trends do not last for long as such approach is not -- clearly is not sustainable in the longer term, Girish. However, we are not worried about this trend and neither does it require any changes to our strategy.

[Operator]

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

[Dipak Bohra, executive]

Yes. Thanks. Thank you all for joining the call. In case we could not take any questions due to time constraints, please feel free to reach out to the Investor Relations team. Have a nice evening. Thank you so much.

[Operator]

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