Digital services, which is growing much faster than the rest of the company, constituted 26.7 percent of total revenue at India’s third-biggest software services provider at the end of March quarter
Revenue from the IT services unit, which accounted for about 96.7 percent of all revenues for the fiscal year ended March 31, 2018, rose 4.6 percent. In comparison Infosys ended the year with 7.2 percent increase in revenue and 11.7 percent growth in net profits. Top-ranked Tata Consultancy Services grew by 8.6 percent.
Wipro needs to find ways of jettisoning its legacy baggage as quickly as needed, to unlock the full value of its digital investments. It’s recent sale of a clutch of data centres is an example of such steps — the sale added money to the kitty and cut away a business with little prospect of growth. More such streamlining is needed, and at a faster pace.
CEO Neemuchwala pointed out how well the digital services part was performing, in a conference with reporters, discussing earnings on April 25: “Our digital revenues grew 9 percent sequentially and 27.6 percent on a year-on-year basis in Q4 and now constitute 26.7 percent of our revenues. In Q4, we closed our highest bookings till date on digital deals and in the last one year, have won close to 70 deals (each) over $5 million.”
The drag from the legacy business, however, was high enough for Wipro to provide only a lacklustre projection for its current quarter revenues. IT services sales will likely be lower, at $2,015 million, or almost unchanged, at $2,065 million, Wipro estimated, versus March quarter’s sales of $2,062 million.
The guidance is “un-enthusing,” wrote Reliance Securities analyst Harit Shah, in a note to clients on April 26. Even after taking into account that the June quarter is “seasonally weak” for Wipro, “the guidance implies loss of revenue momentum.”
“The poor start to FY19 is likely to ensure that the year will see the IT major recording its 7th successive year of single digit growth. This quarter, most IT firms that reported results posted good performance and/or gave a positive growth outlook, beating street expectations,” Shah said. “In this context, Wipro clearly trails and we expect it to take at least 2-3 quarters before the IT major can achieve industry-level growth.”