Wipro Limited (507685) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Wipro Limited Q4 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, Corporate Treasurer and Head of Investor Relations. Thank you, and over to you, sir.

Yes. Thank you, Yashashri. Warm welcome to our quarter 4 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 kind attention to the fact that during the call, we may make certain forward-looking statements within the meaning of Private Securities 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 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.

Thanks, Dipak. Hello, everyone. Thank you for joining us today. It's hard to believe that it's already been a year since I took over as CEO. When I look back at these 12 months, I can see clear progress across many areas. We won 2 mega deals this year. It's a strong sign that our large deal engine is working and continue to expand. Our clients have responded well to a consulting-led AI-powered industry and cross-industry solutions. This is reflected in the strong growth in top accounts and large deal bookings in FY '25. We have continued to invest in our people, skilling them for the new AI wave. Our execution rigor with speed has been acknowledged by clients, and that's reflected in the clear improvement in our client satisfaction scores. And we have done all of this while strengthening our margins. It's a meaningful achievement in the context of such ongoing change. The global industry environment remained uncertain for most of the year and the recent tariff announcements have only added to that. I've been speaking to clients across sectors to understand how things are playing out on the ground. Even though the underlying demand for tech reinvention remains strong. Clients are approaching it more cautiously. In fact, they are focused on cost, speed and AI-led deficiency. And that's exactly where we are leaning in. We see this as an opportunity to move with purpose, make smart bets and stay committed to our 5 strategic priorities, driving consistent profitable growth remains a clear priority for us, and we are focused on making that happen. With that, let's look at our quarter 4 and FY 2024-'25 performance. All the growth numbers I shared will be in constant currency. Our IT Services revenue for quarter 4 was $2.6 billion, reflecting a sequential decline of 0.8% and 1.2% on a year-on-year basis. The order booking for quarter 4 was at $4.0 billion, which is a growth of 13.4% sequentially and 10.5% on a year-on-year basis. Our operating margin came in at 17.5%, which is flat sequentially and 110 basis point expansion on a year-on-year basis. For the full year, IT services revenues were $10.51 billion, reflecting year-on-year degrowth of 2.3%. Our operating margin was at 17.1%, an expansion of almost 1% as compared to FY '24. Now to our strategic market unit performance. Americas 1 grew 0.2% sequentially and 6% on a year-on-year basis. Americas 2 degrew 1% sequentially and 1.8% on a year-on-year basis. Europe degrew 2.5% sequentially and 6.9% on a year-on-year basis. APMEA grew 1% sequentially and degrew 4.9% on a year-on-year basis. Moving on to our industry sector performance. BFSI degrew 0.5% sequentially and grew 0.8% year-on-year. Health care degrew 3.1% sequentially and grew 0.1% year-on-year. Consumer degrew 1.3% sequentially and was flat year-on-year. Technology and Communications degrew 0.9% sequentially and 1.1% year-on-year. Energy, Manufacturing and Resources grew 1.1% sequentially and degrew 7% year-on-year. Capco continues to perform well, growing 6.5% sequentially and 11.5% on a year-on-year basis. Let me now provide an update on our 5 strategic priorities. As I mentioned earlier, we are continuing to see strong momentum in large deals. In quarter 4, we closed 17 large deals with a total value of $1.8 billion across markets and sectors. For the full year, we closed 63 large deals for a total value of $5.4 billion, which is a year-on-year growth of 17.5%. Now let me highlight 2 recent wins. A global technology leader has chosen us for a major 5-year transformation program. We will deliver AI-powered end-to-end IT services completely reshaping the employee experience for 200,000 users across 200 countries. Our solution involves proactive support, intelligent self-service and personalized digital interactions. My second example is our recent partnership with a leading global food distributor. We are taking over their entire IT infrastructure and corporate application, which includes HR, finance and legal systems. We are leveraging AI solutions, and we will drive automation and simplify user interactions. For our clients, this will result in higher efficiency, lower costs and better user experience. As we all know, AI has been part of deal conversations for a while. But this year, it's become central to almost every opportunity, big or small, helping drive productivity and efficiency. This reflects a broader shift we are seeing across the board. Let me now move on to large accounts. We continue to focus on our large accounts in our core markets and priority sectors. In quarter 4, our top 5 and top 10 accounts grew 0.3% and 1.1%, respectively, on a sequential basis. Let me also share an example that shows our momentum in strategic accounts. In quarter 4, a leading Indian private bank expanded our strategic partnership as part of a business focused digital transformation. We will provide the bank AI-powered solutions to strengthen compliance management and addressing critical need for regulatory compliance in addition to enhancing the overall experience for the bank. Now this will also help the bank boost operational efficiency and realize its growth ambition across various functions. We continue to create impact for clients through our consulting-led AI-powered industry and cross-industry solutions. This was our third strategic priorities we had called out. In this context, let me talk about a recent win in the aviation sector. A well-known Pacific Airlines shows us to modernize its crew management and operation systems in quarter 4. In fact, we were selected for our proven ability to future-proof client IT platform with AI. We will deploy our own TOPS platform to manage end-to-end crew operations, providing a unified, scalable solution that enhances experience and drives sustained operational efficiencies. Alongside all of this, we have put even more focus on client centricity, hence starting to show results. Our latest third-party annual customer satisfaction survey clearly shows improvement in overall satisfaction scores and NPS. In fact, I would like to thank our team who have made this possible. As you are aware, we have also realigned our global business lines effective April 1 to better meet our customers' needs. This change will help us deliver stronger business outcomes for our clients. Finally, and just as important, supporting and growing our global talent has been a top priority all year. You might remember that last quarter, I spoke about our focus on leadership development, and how we are building future ready leaders through our Wipro Leadership Institute. In fact, we have moved our top performers into key client-facing roles to ensure continuity and stability. And we have also launched a sponsorship program to help them succeed. Now we have a note on guidance before I wrap up. Given the uncertainty in the environment, we expect clients to take more measured approach going forward especially on large transformation programs and discretionary spending. With this in mind and based on our current visibility, we are guiding for a sequential growth of minus 3.5% to minus 1.5% in constant currency terms. Let me now turn it over to Aparna for a detailed overview of our financials. Thank you. Aparna, over to you.

Thank you, Srini. Good evening, and good morning, everybody. Let me share a quick update on our financial performance for the quarter ended 31st March 2025 before we move onto the -- and after that, we'll take questions. Our IT services revenue for Q4 sequentially declined by 0.8% in constant currency terms. This is within our guidance guided range. For FY '25, our IT services revenue declined by 2.3% in constant currency terms. Our rigorous focus on operational improvement has ensured that the margin has steadily improved over the last few quarters. For Q4, operating margins at 17.5% expanded by 1.1% year-on-year. This brings our FY '25 operating margin expansion to 0.9%. As we enter FY '26, we are faced with headwinds on account of an uncertain macroeconomic environment that is putting a downward pressure on our revenues. Our endeavor would be to maintain these margins in a narrow band in the coming quarters. Our net income grew 6% quarter-on-quarter in Q4 and 19% for the full year. Our EPS for the full year was at INR 12.6, a growth of 20% year-on-year. We finished the financial year with a free cash flow as a percentage of net income at 118%, which takes our gross cash, including investments to $6.4 billion. In Q4, our other income grew by 45% sequentially and our accounting yield for the average investments held in India was at 7.9%. Our ETR was at 24.3% for Q4 '25, against 26% in Q4 '24. Our hedges continue to be in line with our policy. We had about $2.4 billion of ForEx derivative contracts as hedges at the end of Q4 '25. In terms of guidance to reiterate what was stated by Srini, we expect to -- our revenue -- we expect the revenues from our IT Services business segment to be in the range of $2.505 billion to $2.557 billion. This translates to a sequential guidance of negative 3.5% to negative 1.5% in constant currency terms. With that, I turn this over back to the operator for questions.

[Operator Instructions]. We'll take our first question from the line of Nitin Padmanabhan from Investec.

Good evening. Thank you for the opportunity. Srini, just wanted your thoughts on which verticals are you seeing the highest impact at this point in time?

Nitin, if you look at sector-wise sector view, the way the economic environment has become uncertain on the back of tariff increases. We are seeing this impact not just in the U.S., of course, but also in the Europe. Similarly, we are also seeing across sectors directly or indirectly, these impacts. But some sectors have been impacted more like consumer, manufacturing, within manufacturing, specifically automotive and industrial. And we are seeing indirect impact on most of the sectors, if you will. For us, the clients in these -- all the industries are taking a lot more cautious approach at this point in time. And they're also doing a scenario planning because they would like to see when this whole thing will settle down before they start making more business decisions. And that's how currently it's playing out, Nitin.

Okay. So how are you seeing BFSI broadly in the -- currently in terms of how they are thinking about things both U.S. and Europe?

So if you look at our results, we have been seeing good traction in BFSI, specifically in the U.S. and in APMEA and also our Capco business, both in terms of revenue and order book. I think what we faced is headwinds in Europe, in the BFSI sector. But again, the good news is that we have a good pipeline and there is still momentum. Now there are -- obviously, if you look at the kind of deals that we are getting, right? One, we are definitely looking at apps and IT infrastructure modernization. There are opportunities around BPS, which is business process services and cyber security. And we are also looking at opportunities in consulting, which is a reflection of our Capco business. Also in some of our solutions where it's asset and wealth management. I think this is a good time the customers are relooking at how they can leverage AI powered solutions. We're also looking at insurance platform digitization, also payments, right, which is all around our AI interest industry solutions. And we are seeing traction around that. What we are doing clearly is that -- we want to prioritize how Wipro and Capco can come together, bring in more synergies with Capco being the tip of the spear and Wipro actually executing end-to-end. And I think this is also helping us as we move forward, specifically on the BFSI sector.

Right. So you're not seeing any specific weakness in the near to medium term here, they continue to spend. You're not seeing any pullback of spending from a BFSI perspective?

So the 2 perspectives, Nitin. One is, like I said, the pipeline is strong. But the clients are cautious about the spend, especially BFSI, which is discretionary, right? So the early signs are, they are waiting and watching some of the decisions have slowed down, if you will. In case, luck would have it, if the uncertainty comes down in the next few weeks, we are hoping, the clients will start taking decisions on these project opportunities because that's the need of the hour for them.

Sure. Perfect. This is very helpful.

We'll take our next question from the line of Abhishek Kumar from JM Financial.

Srini, first of all, congratulations on good deal wins in a difficult environment. My question is on deal to revenue conversion. If we look at our book-to-bill over the last 2 years, it has been consistently at least on an LTM basis, above 1.3x. But it has not really translated into revenue growth. And if we add to that better performance in Capco where the conversion would be even better looks like x of Capco the conversion is quite soft. So I just wanted to understand what exactly has driven this poor conversion so far? Is it cancellations? Is it lower ACV growth because of longer tenure -- and which of these 2 you think going forward might change for us to build some sort of growth given improved deal wins.

So Abhishek, as you know, the booking to revenues, it's very difficult to correlate them within quarters because the timing differs from these 2 deals. For example, the large deal that we have secured in Q4 that we announced will take some time for it to ramp up there is a schedule that's signed off with the client, and there's work to be done before for us to be able to start that. So there will be some timing gap that will always be there in case of on some of these large deal wins that we've had. You're right, consistently be one more, and that is adding to revenue, even with, let's say, a deferred timing what we are ultimately reflected in the -- what it gets reflected in the revenues also some of the ramp downs that happened as a result of lower discretionary spends and project spends going down, right? So we need to win more. We need to fill that bucket a lot more for it to start reflecting in net revenue growth. And that's how I would characterize it. We're happy with the way the engine has started to crank with the same momentum that persist on large deal,s, if the medium and small-sized deals also come back into the play, I think you will see a pickup in revenue growth.

Sure. Maybe a quick follow-up there. Do you think those ramp-downs, which your client specific are now largely behind us. And therefore, it is just a matter of timing before these deals start to reflecting revenues.

Abhishek, let me give you some kind of commentary on what we saw. If you look at it, we started quarter 4 on a positive note. But gradually, during the quarter, the sentiment turned negative. I think this is because of tariff hike and anticipation around that, and it did have a cascading impact on this. Now to me, this has definitely impacted our revenue growth momentum across sectors and markets. One example I can tell you is we were doing a large SAP program, which was very critical for the client, and this was in the consumer sector. And when the client heard about the tariff situation, they were bang in the middle of that and they put the whole program on pause. Not because they don't want to do the program, but they wanted to understand, get the certainties of the tariff situation. So that's one good example I can give, where the program has been put on hold. Also, in Europe, some of the clients have slowed down transformation projects. It's not that they have paused it, but they said we can relook at the time lines at this point in time. Also, we did see several instances of volume drop in some of our existing accounts and maybe because some of them are because of the delay in initiating the projects and some also, there was an impact of ramp downs. The way I see it is that this is a transitional phase. And hopefully, and obviously, I can't predict how the tariff situation, the macroeconomic will turn out, but this will gradually stabilize. I think as an organization, what we are doing is we are working with the clients and understanding their scenario planning and trying to actually pivot to the way they are looking at how the business is coming next. And I think that's most important for each and every employee of Wipro, sense and respond to the client situation.

We'll take our next question from the line of Manik Taneja from Axis Capital.

Srini, basically just wanted to pick your brains 2 things. Number one, we continue to see pressure in Europe through the course of last several quarters, would be great to get your perspective as to what's driving that? And the second related question to that essentially is that similarly on a segmental margin standpoint as well, while Capco has recovered, we see no improvement in terms of the segmental margins for the European geography. If you could talk about what's dragging the margins here?

Sure. I'll take the Europe question, maybe I'll leave the margin situation to Aparna, Manik. Now let me talk about this, right? I think your observation is right. If you look at our revenues for last year. On a full year basis, Americas has actually grown 1.2%, and it is Europe, which has been shown a degrowth. In fact, APMEA had degrowth, but in quarter 4, they actually turned sequentially positive. Now the situation at Europe, we have a new leadership team. Second, we have a very strong pipeline of deals. Three, we just won a large deal, Phoenix deal, which you are aware of, and that deal will start kicking off in a few months from now as per the contract term. Net-net, if you stay focused on the deals that we have on the table, which I think the entire European leadership team is currently focused on. We should be able to look at a positive momentum in Europe in the next coming quarters.

Manik, can you repeat your question on margins?

So Aparna, my question on margins was that in during second half of FY '23, we started to face some pressure in Capco, we blame some of the margin decline that we saw in European geography also because of the drag from Capco. Through the course of recent quarters, Capco has been doing quite well, but there has been no recovery in segmental margins for Europe. So if you could dwell into what's causing that? And the last one, if I may just clarify. On the Executive Board research, if you could talk about where are we in that journey? Are we done with most of the organization changes?

Your question is not very clear. I think the question that you asked on margins was that Capco may have been a drag on Europe margins, and therefore, how they're rebounding. In some sense, I think Capco has been doing well from the standpoint of its growth and bookings, and there has been a lift off in the margins as well. Overall, they are doing much better even from an operating margin performance, at least in Q4, they've done very, very solid performance. So in that context, yes, Europe margins have also been impacted by some of the other ramp downs that we have seen and the non-Capco part of the business.

Sure. And in any sense on when do we start to see some of these pressures recede?

In Europe, you will note that we have actually won a very large deal, and that should start ramping up through the course of the year and especially towards the second half. And therefore, you will see a bounce back then. And we also have a solid pipeline that we think we can close between now and September, and that should also then add.

Sure.

Does that answer your question, Mr. Taneja?

Yes, thank you.

We'll take our next question from the line of Vibhor Singhal from Nuvama Equities.

So 2 questions from my side. Srini, on the overall macro weakness that you have spoken about. So can you give a bit of color as to -- I'm sorry, I was disconnected for a part in this call. But to highlight that was some part of the weakness also responsible for the slightly lower growth that we reported in this quarter. And given that we are exiting FY '25 on a negative decline, and we would be entering FY '26 also on a negative note. Is there a possibility that we would be able to report a positive growth in FY '26 or FY '26 is also is likely to be a year of top revenue decline just like FY '25 was? And then I have a follow-up for Aparna.

It was [indiscernible] we don't give...

I'm sorry to interrupt, sir. You are on mute mode, I believe.

Yes, sorry. Vibhor first and foremost, as you know, we don't give a full year guidance. Having said that, the recent development, especially the macroeconomic situation, the tariff situation, we are, like I said, keeping a very close watch on how the situation is evolving and how our clients are responding to that or reacting to that. At this stage, our quarter 1 guidance represent best visibility we have. And definitely, we will share all the updates coming quarters as we get clarity on the situation. Also, if you look at what Aparna said on the Phoenix deal we announced in quarter 4, this is actually expected to ramp up starting H2. And definitely, that will help uplift our revenues.

Got it. Got it. And the initial part of the question was, was there any weakness also felt in this quarter also because of which we came towards close to the lower end of the guidance for Q4?

So yes, Vibhor, if you look at in the last few weeks, right, you've seen the economic environment. You've seen many of the analysts and how they have been forecasting from January to February to March, there is a drastic change in terms of how the industry has been looked at, right? And to me, this impact of tariffs, obviously, is not just U.S. but also in Europe, right? And again, it's not just in a few sectors, but across sectors. The only difference is certain sectors are seeing direct impact. Certain sectors are seeing indirect impact. So the ones I called out our consumer manufacturing, especially automotive and industrial, we have seen a direct impact of the customers. And obviously, they are looking at their cash position, they're looking at how to reduce the cost and they're also looking at significant scenario planning because they have the manufacturing plants globally. And in the context of tariffs, and these products move -- components move from country to country and so on and so forth. So they are holding back on any further investment. And I think that's what we are seeing from our side as well.

Just one follow-up for Aparna. So Aparna, I think margins have remained quite resilient through the year. For the next year and going forward that you're looking at, you mentioned that we are expecting margins to remain in a narrow band. In terms of, let's say, the growth not being strong in FY '26 given the kind of headwinds that we are seeing on a macro level. Do you see a risk to the margins from current levels on an overall year Conversely, if growth were to return, especially in the discretionary spend in the second half, you also have had...

I'm sorry to interrupt Vibhor. Your voice is not very clear. Can you repeat the question and use your handset mode, please.

Yes, sorry, am I audible now?

Yes, please go ahead.

I'm sorry for that. So Aparna, just a question on the margins. So as you mentioned that the margins will remain in a very -- in a narrow range from current levels. So just wanted to check if, let's say, the growth in FY '26, is weak and if it comes on the decline front, then do you think the margins could be under pressure because of that as well. Conversely, if discretionary spends were to pick up, let's say, 2 quarters down the line in H2, we also have the Phoenix ramping up as new for us. Would that mean that we could basically have a good jump up in the margins and possibly some tailwinds which would take it to the high level. What are those levels that you're looking at?

So Vibhor, it is very difficult to say which way the revenues are going to go. I think what I heard is if the revenue environment continues to be bad will we continue to hold margins, right? Now the reality is there will be pressure on margins as we start Q1, there are 2 headwinds: one, of course, of a weak revenue environment; two, that of a lot of these that we've spoken about, which are a part of our pipeline are actually cost takeout and vendor consolidation deals, which inherently come with a pricing pressure and therefore -- and also very competitively fought. So we will prioritize growth, we will prioritize the fact that we would like to invest in our clients, and therefore, that will become priority. And therefore, these 2 are headwinds. And like I said, our endeavor would be to keep the margins in a narrow band. It is a huge stock given the kind of guidance we have given for Q1 but all hands on the deck. What can be the levers? The levers will go back to everything that we have done up until so far to get to 17.5%, which will include making sure that our bench costs are managed tightly, making sure we are driving higher productivity in our fixed price programs, making sure we continue to optimize and cut down on some of the fixed spends that we have as the business comes down. So those are things that we've done without cutting into the muscle, without cutting into S&M, that's been our journey so far, we will only have to accelerate it. And you know we don't guide for margins. So the endeavor going to be to keep it at least in narrow band in the coming quarters and then some where we will see.

We'll take our next question from the line of Kumar Rakesh from BNP Paribas.

My first question, for a minute, If I assume that I didn't knew about the macroeconomic issues and would have looked at the numbers that you have reported just as on. Your headcount on a sequential basis has increased quarter-on-quarter after a couple of quarters of decline. Your total bookings and large deal wins are pretty strong in the quarter and Capco, which is quite discretionary focused, reported pretty solid growth in the quarter. I would have expected that the next quarter would see a decent growth. In contrast to that, the guidance that you have given at the midpoint implies that you would see one of the lowest growth in outside of COVID period probably. So what is incrementally that you're looking at, which is giving you this, which is essentially making your guidance to be that weak. Are there specific ramp downs that you're looking at? The volume declines that you're building into that assumption? If you can give some more granular details essentially, what specifically is pulling down this guidance?

So there are 2 aspects. I will go first and then Srini, you can add. Clearly, we've spoken about how there is some uncertainty in the macroeconomic environment that's playing out. While Capco has printed strong numbers for Q4, there is -- and in something, they also have witnessed gains in market share, et cetera, right? And if they put on a solid performance. But the macroeconomic environment will impact other sectors that we spoke about, including consumer manufacturing where we are seeing some softness. The other part of -- from a market unit standpoint, for us, Europe, the weakness in Europe is likely to continue into Q1 -- and hopefully, from there we look at how to build on the momentum on the back of some of the large deal wins that we have had, both in Q4 and in Q1, Rakesh.

So Rakesh, maybe if I could add a few more points here. Based on my client conversations, right, a few things I'm noticing. One is large transformation projects programs, one of them I talked about are getting paused or being delayed or kind of changing the schedules. Second, while the clients have their budgets, they want to review it post the certainty or at least understand where the situation will end up. And one of the things that I constantly see, especially in the industries that have direct influence, there are cost pressures. And definitely, I think the demand for tech-driven efficiencies and costs will continue. And we are -- that's the kind of pipeline that we are seeing, which is also how do you help the clients bring in more efficiency, automation and of course, GenAI. And the point that Aparna made in the previous question is around vendor consolidation, tail vendor consolidation, so on and so forth. But the point and the good news is that right now, the pipeline is strong. I think that's good news. And this is, again, evenly distributed both in terms of large fields and also small deals. And I can tell you, while Europe has gone soft -- has been soft for us, I see a good pipeline there across sectors. So -- and I think the focus for us has to be closing those deals quickly, which could translate to revenue, hopefully, the next few quarters, if you will. But net-net, the situation is compared to COVID, this situation is very different. The situation is not that the client businesses are going to stop. The situation here is how this tariff will impact the customers business in the context of the cost price and consumer demand. I think that's what they're trying to wait and watch and see before they take decision.

My second question was, if I step back and take a little longer-term view on the full year performance and the recent history. So this is the second year in which we are seeing the revenue decline. And looking at where we would be exiting this year, the first quarter, even if for the rest of the year, you grow, you would most likely you will see a revenue decline in FY '26 as well. So there is a high likelihood that we would end up with 3 years of revenue decline. The first quarter revenue would be back to where it was the quarterly revenue back where it was 4 years back. So while I'm aware of the 5 priority areas, the 5 focused areas that you are working on and we have started seeing progress on those areas. What do you think is the problem that essentially is ailing that we are consistently underperforming and likely to continue to underperform for the next few quarters?

So I think it's a good question. I can tell you that it was obviously for us FY '25 was a mixed year. And we also made a progress on a few fronts. But if you double-click on the revenues, while we have grown -- degrown 2.3% in FY '25. I'll definitely call out Americas, which contributes close to 63% of our revenue. That piece of the business has grown 1.2% in FY '25. The second piece of the business, which is APMEA, it has actually degrown 9%, but the region has recovered in the second half of the year and delivered a growth of 1% in quarter 4 sequentially. Well, Europe, I called out, has been a challenge for us. It has degrown 7% year-on-year and 2.5% sequentially in quarter 4. Our focus has been to stabilize and bring this region back to growth trajectory. To this end, we had new leadership. The leadership has come together and we are seeing it in as far as the traction on the ground is concerned. The good example is Phoenix deal that we have closed, which will help us get some momentum on the revenue side, if not next quarter, second half of the year, like I said. And what is the important thing that I want to call out is our deal pipeline in Europe. And that's very encouraging to me. And we have a good opportunity for us to stabilize and also bring growth back in Europe. So essentially, the problem statement is the Europe and how Europe will turn around, which will have an overall impact on Wipro's performance.

We'll take our next question from the line of Gaurav Rateria from Morgan Stanley.

I have a couple of them. Just first question for Srini. What exactly your guidance assumes with respect to normalization of the environment? Is it that the environment remains tough throughout the quarter is what your assumption is? Or you expect that to normalize over the coming weeks and some bit of that reflects an improving growth over the coming months may not be a start of the quarter, but back half of the quarter?

Gaurav, I'm talking to someone who is on a daily basis, looking at what's happening in the macro environment. Maybe I should ask you off-line this particular question. But clearly, in the context of the guidance we have given for quarter 1, right? We have factored in assumptions for the -- both at the lower end and upper end of the guidance. So our guidance for quarter 1 that we have given is based on the best visibility, both in terms of revenue and what we have seen currently, right? However, the upper end of the guidance is, if we see the improvement in the demand situation from where we are today. So the lower end of the guidance will obviously has to factor in a worsening of the demand environment. So we are somewhere in between that, Gaurav. I don't have a crystal ball to say when this whole certainty -- uncertainty will come become certain. And all of you have -- how we have forecasted from Jan to Feb to March. It never happened before. Even during the COVID crisis, we did not see the analyst coming back and changing the forecast so rapidly in 3 months and few weeks. So I'm only hoping for the best case scenario, which will impact our higher end of the guidance, worst-case scenario, which will be at the lower end of the guidance. That's the best way I can answer your question, Gaurav.

Sure, Srini. Thank you so much for transparency and explanation. My second question is on the TCV that you report, the total TCV minus. If you look at that number on a trailing 12 months, it's down by around in like 13%, 14% Y-o-Y. Is this the reason why the conversion of order book into revenue gets impacted because these deals convert into revenue much faster than your larger deals. Of course, you're doing great in the large deals, but that takes time to convert into revenue. But this immediately closing and correlate that this part of the business is driving a weaker conversion ratio.

If you look at our overall bookings, we closed the full year with $14.3 billion of bookings. And in some sense, that is -- there is a down year-on-year quarter. But if you look at our large deals, which is something that we've been categorically wanting to improve have gone up. So you're right, that the deals that are there in the smaller and medium-sized bucket are not growing fast enough and our bookings are largely coming through the large deal. So to that extent, now whether that has direct correlation that do larger deals take longer to convert vis-a-vis do smaller deals? Are they -- will they come into the conversion much faster? That's just conjecture. I don't think there is analysis or there is a causal effect to that extent. But yes, if that also starts to grow, it will have an impact on our overall revenue growth.

Got it. Last question for you, Aparna. Just trying to understand that when revenues actually decline, it has an impact on the utilization rate, which could be a possibility in 1Q. But let's say, if you were to maintain margins in a narrow band, what would be the underlying assumption for utilization rate? Should it be fair to believe that utilization has to be around 87%, 88% in the current to hold on to margins in the narrow band.

Gaurav, there are several levers at play and utilization is one of them. Certainly, utilization needs to improve or at least sustain even though in a weaker revenue environment, that's what we will be focused on. There are other levers at play that I spoke about, fixed price, productivity, further costs in our G&A, overhead rationalization, improvement in other programs that we are driving from a standpoint of how we're looking at profitability. So there are many levers at play with utilization being one of them, Gaurav.

We'll take our next question from the line of Surendra Goyal from Citi.

Srini, just one question. Your sales and marketing spend in USD terms is down high single-digit Y-o-Y in FY '25. At a time when you continue to lose market share versus peers, so do you think anything needs to be done differently here? Or do you think you are doing enough, investing enough for this to be able to drive the catch up with peers on growth rates?

I think, Surendra, you probably look at our S&M even year-on-year. I think that's a good reflection. Quarter-on-quarter, there could be certain noises that could impact and I must tell you that from an employee compensation standpoint, we -- there is no change in the S&M, right? A lot of what we are doing is rationalization of maybe more G&A kind of roles, right? And there, again, we are looking only at those roles that are like by design, need to operate from India. And therefore, if they're not client-facing and in high-cost geographies, we've got them down. So you can be rest assured that we're not cutting down on S&M, especially from a sales standpoint. In fact, we are going ahead and investing in our people in the cross industry and industry solutions and in AI. Srini, you want to add.

Yes, sure. So just to add, Surendra to what Aparna said, first and foremost, right? We continue to invest in sales and marketing and the strategic areas that we talked about, but that's consulting, but that's AI powered investments around innovation and so on and so forth. So we are not -- we are investing for growth. So I want to be very clear on that aspect of it. However, if we have created design principles, where if the roles are not client facing, not enough roles that can be done from home. It doesn't make us the necessary sense for them to be sitting there. So we are moving such roles to low cost, either it could be in Europe, Latin America or India, depending on where it is coming from. So that's what would have -- has reflected Surendra. But let me be very clear. If we have to be consulting late AI-powered Wipro for the industry segments where we are going to prioritize on, we're going to go full throttle on growth in those segments and investments, sorry.

Understand. So you think you are doing enough. So I get the point.

We'll take our next question from the line of Ankur Rudra from JPMorgan.

Can you elaborate a bit on the extent of the ramp downs, cancellations, delays you mentioned that has happened only in the last 2 weeks since the tariffs came out. How much of this is fresh and is that what you're building into both ends of your guidance now?

Our guidance bakes in the current visibility that we have, Ankur, at the moment. It certainly reflects the macroeconomic environment and the visibility that we have in terms of the trends that our clients will meet with us. So in some sense, it factors, like Srini said, those uncertainties as well. And as you know, we guide in a range and that gives you a good perspective of what we're looking at for the quarter.

Right. So I mean I'm just trying to dig in a bit deeper to your previous answer where you spoke about if macro improves at the upper end, if does not at the lower end. I was wondering how much of that just changed in the last 2 weeks?

So Ankur, from our perspective, I think after the pause for 90 days on the tariffs, I think there's a little bit of stability that we have seen. And that's, I think, reflecting on the last 2 weeks that we are talking about it Ankur. But we don't know what we don't know at this point in time, how this will play out especially with China on the tariff side. So it's a little difficult to predict. But again, just to repeat what I said and again, what Aparna said, right? Based on the best visibility in terms of revenues that we have, we've given the upper end of the guidance. Assuming the demand situation from where it is today will stabilize and improve and the lower end if it worsens further.

Okay. Understood. Just talking a bit about AI. Can you talk a bit about how AI-related productivity pass backs or deflation might be playing into your contract renewals? And if you are proactively infusing AI gains into your existing deals, does that put existing TCV numbers at risk?

So at this point in time, Ankur, I'm not seeing any significant impact either on revenues or margins. right? What we are doing is whatever benefits of GenAI that are applicable to our customers, right? In many of the cases, some of the times, the customers' budgets are getting freed up. So we are actually using GenAI and also getting some incremental work done for the same customer. And that could also offset some of the revenue drops you're talking about. But what is important to call out is while we continue to introduce GenAI into managed services deals and also the managed services opportunities that currently exist with our existing clients. We're also leveraging GenAI to actually look at a completely new revenue stream. And that's for us as part of it changing the game, leveraging GenAI. So it's not just operating better or developing better for the clients on GenAI, but also changing the game for them. And that's an exciting piece if you ask me. And I can just -- for example, we just announced a partnership with NVIDIA on sovereign AI, right? We did this collaborating with them, and we have announced SIAM.AI in Thailand. And this is something which is very new, which has a huge impact on tourism industry, starting with Thailand, and it could get replicated across countries. So that's one good example I can talk about. Another example, Ankur, just leveraging GenAI, one of the large cities in Europe, we are actually doing as part of the smarter city, we are doing predictive maintenance of the critical infrastructure, right? That's a very interesting, very high-end kind of work. In fact, we got this AI agents actually the physical agents I'm talking about going and looking at aging of the pipes that are there, ground situations and so on and so forth. Everything is AI based, and this is AI-based problem detection, right? And also the end benefit for the city is preventive maintenance of the water pipelines, for example. So this is also going to help the city in terms of reducing the manual inspection and, of course, the overall maintenance costs. So these are the great examples Ankur that I'm seeing where GenAI can give us new opportunities for growth.

Yes, if I can just squeeze in one last question. You had mentioned success in your large accounts. If I look at the client metrics for the last several quarters and especially this quarter, it's across sizes, whether it's $100 million down to $10 million has been an element of softness. Could you clarify how much of this is from FX versus client losses or cuts in discretionary spending?

Yes. If you look at the number of $50 million clients that we have, we broadly remain the same. We've said -- we've mentioned that our top class, our top 5 or top 10, they're all growing. In fact, even in Q4 of '25 on a year-on-year constant currency basis, all 3 have grown. The number of clients, active clients that we are seeing going down is just a reflection of the overall revenue environment and the lower discretionary spend.

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.

Yes. Thank you all for joining the call. In case, we could not...

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Yes. 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 Investor Relations team. Have a nice evening. Thank you so much.

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 lines.