Prepared remarks
Ladies and gentlemen, good day, and welcome to Wipro Limited Q1 FY '26 Earnings Conference Call. 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.
Yes. Thank you, Yashashri. A warm welcome to our quarter 1 financial year 2026 Earnings Call. We will begin the call with business highlights and an overview by Srinivas Pallia, our Chief Executive Officer and Managing Director; followed by updates on the 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 this call, we may make certain forward-looking statements within the meaning of the 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. Thank you.
Thank you, Dipak. Good evening, everyone. Thank you for joining us today. Let me start with a quick view on quarter 1 and the broader environment. We started the quarter facing significant macro uncertainty which kept overall demand muted. Our clients prioritized initiatives with immediate impact, primarily focusing on cost optimization and vendor consolidation. And at the same time, they accelerated their AI, data and modernization programs. We saw a clear trend of many AI projects moving to scale and production. We quickly aligned with these priorities, deepened our partnerships and secured key deals. The large deals we closed this quarter and last quarter, along with a strong pipeline put us in a good position for the second half of the year. With that, let me now turn to our quarter 1 performance. I will start with key financial highlights and an overview of our markets and sectors. Aparna will provide further details on the financials in her remarks. Our IT Services revenue for quarter 1 was $2.59 billion, a quarter-on-quarter degrowth of 2% in constant currency terms within our guidance range. Our IT Services margin was 17.3%, an expansion of 80 basis points year-on-year. In our markets, Americas grew 1.5% year-on-year in constant currency terms, and we are continuing to see strong yield momentum here. APMEA's revenue stayed flat. Digital spending in India, Middle East and Southeast Asia kept the market resilient. Europe continued to face headwinds and clients remain focused on maintaining their competitiveness in this environment. Capco grew year-on-year, driven by strong performance in Latin America. Turning to our industry sectors. In BFSI, demand is strong and steady. Clients are modernizing their IT landscape with a sharp focus on AI-led efficiency and transformation. We also won 2 mega deals here, which I will discuss later. In consumer and EMR, we are seeing a more cautious mode. Retail, CPG and manufacturing have been most affected by tariffs. Even though discretionary budgets are tight, outsourcing renewals are creating new opportunities to gain wallet share. In Technology and Communication, we are seeing a clear shift towards AI investment. Clients are looking to innovate and future-proof their software and platforms. We won a large deal here that has the potential to become a mega deal. Health care continues to do well as clients invest in modernization and digital transformation. While payers are under cost pressure, the overall outlook for the sector remains positive. These priorities and shifts in client focus are evident in the strategic deals we have won in quarter 1. During the quarter, we reported bookings worth $5 billion in total contract value, a growth of 51% year-on-year. Our large deal bookings reached $2.7 billion, up 131% year-on-year. This includes 16 large deals this quarter, including 2 mega deals. Several of these wins were driven by vendor consolidation, where we continue to build strong momentum. These deals reflect a good balance of extension of existing work and securing new business. They also highlight our capabilities, domain expertise and progress in AI. Let me share 3 examples to bring this to life. My first example is a global banking leader that selected us as a strategic partner to transform technology across multiple business lines and enterprise functions. They chose us for our deep BFSI expertise and consulting-led approach. We will transform their digital ecosystem, modernize their cloud and data platforms, improve cyber resilience and embed AI across the software development life cycle, helping boost engineering productivity and reimagine core processes. Second, a leading global semiconductor company signed a multiyear agreement with us to modernize its entire product life cycle. Building on our long-standing partnership, we will drive end-to-end engineering transformation from silicon design and system software to platform development and hardware validation. Our focus is on using AI and automation to accelerate development, improve quality, reduce costs and enable agile practices. Finally, we secured a mega deal with a leading North American bank extending a decade-long partnership. We will transform the technology across core banking, wealth management and retail using our AI-powered global delivery framework. This includes modernizing their cloud infrastructure, strengthening cyber resilience and enhancing their digital ecosystem and enterprise applications. This will accelerate innovation, improve time to market and deliver a more customer-centric experience for our clients. In fact, these examples highlight a clear trend. AI is no longer a niche. It's becoming essential to how businesses operate at scale. At Wipro, we see AI as the force reshaping industries and amplifying human potential. We at Wipro are building an AI-first, AI-everywhere enterprise focused on solving complex challenges, accelerating delivery and reimagining operations at scale. By embracing autonomous and Agentic AI, we are transforming business models and how organizations work. In fact, our AI capabilities are integrated into both industry and cross-industry solutions. By combining domain expertise with AI, we are able to deliver value through solutions such as hyper-personalized wealth management and predictive industrial insights, to name a few. So far, we have deployed over 200 AI-powered agents using advanced technologies from leading hyperscalers. For example, these agents enable smarter lending, intelligent claims processing and autonomous network management. We are equally focused on talent and training our team with the skills and mindset to thrive in an AI-first world. Building on the strong foundations and our continued focus on 5 strategic priorities, we are well positioned for the future. I would like to now discuss our outlook for the next quarter. While we are cautious given the macro environment, our strong order book, healthy pipeline and focus on consulting-led AI-powered solutions give us confidence in delivering long-term value to our stakeholders. Returning to profitable growth remains our priority. Based on our visibility, we are guiding for a sequential growth of minus 1% to plus 1% in constant currency terms. With that, let me hand over to Aparna for a detailed view on our financials. Thank you, again, and over to you, Aparna.
Thank you, Srini. Good evening, ladies and gentlemen. Let me give you a brief update on the financial performance for the quarter ended 30th June 2025. After that, we can open it up for questions. Our IT Services revenue for Q1 sequentially declined by 2% in constant currency, which is well within our guided range. On a year-on-year basis, the revenue declined by 2.3% in constant currency terms. Our operating margin for Q1 was at 17.3%, an expansion of 80 basis points on a year-on-year basis. As Srini alluded, many of our large deal wins are in the nature of cost takeout or vendor consolidation. These deals typically come with upfront investments and will cause pressure on the cost. As always, we will continue to focus on operational excellence in order to offset these pressures. Let me give you color on our strategic market unit and sector performance. All growth numbers that I will share will be in constant currency. Americas grew 0.2% sequentially and grew 5.8% on a year-on-year basis. Europe declined 6.4% sequentially and 11.6% on a year-on-year basis. APMEA has grown 0.6% sequentially this quarter, though declined marginally on a year-on-year basis. Moving to sectors. BFSI declined 3.8% sequentially and also declined 3.5% on year-on-year terms. Healthcare grew 0.5% sequentially and has grown 3.5% year-on-year. Consumer declined 4% sequentially and declined 5.7% on a year-on-year term. Technology and Communication grew 0.4% sequentially and degrew 0.3% year-on-year. Energy, manufacturing and Resources declined 0.7% sequentially and 2.4% on a year-on-year basis. Capco continues to perform well, growing 6% on a year-on-year basis. Let me share with you some of the other key financial parameters. Our net income grew 10.9% on a year-on-year basis in this quarter. This was after absorbing a one-time restructuring cost of INR 246 crores. Our EPS for the quarter at INR 3.2 grew by 10.8% year-on-year. Our free cash flow generation continues to remain robust. It was at 115% of our net income. This brings our gross cash, including investments to be at $6.4 billion and net cash actually expanded quarter-on-quarter. In Q1, our net other income grew 62% on a year-on-year basis. The accounting yield for the average investments held in India was at 8.1% for Q1. Our effective tax rate was at 21.6% for Q1 '26, compared to 24.5% last year and the same time last quarter was also 24.5%. Our hedges continue to be in line with our policy at about $2.5 billion of Forex derivative contracts as hedges at the end of Q1 '26. Finally, before I move to the guidance, I would like to share with all of you that in our Board meeting today, the Board of Directors declared an interim dividend of INR 5 per share. With this, we would have now distributed cash in excess of $1.3 billion in the last 6 months. As you know, we revised our capital allocation policy in January 2025 to increase the payout to a minimum of 70% of our net income over a block of 3 years. Thus, going forward, subject to the cash position and Board approval, our endeavor would be to pay these dividends twice a year, once along with the June results and then along with our December quarter results. In terms of guidance, to reiterate what Srini shared, we expect revenues from our IT Services revenue business to be in the range of $2.56 billion to $2.612 billion. This translates to a sequential growth of minus 1% to plus 1% in constant currency terms. With that, we can take questions.
Questions and answers
We'll take our first question from Abhishek Kumar from JM Financial.
Congratulations on the strong deal wins. My first question is about the deal win itself. On a last twelve months basis, the overall total contract value has increased by 10%. However, when I examine the smaller deals on a last twelve months basis, they have decreased by 8% year-on-year. My question is whether we have observed any material increase in deal duration given that the larger deals tend to have longer tenures. How should we approach ACV growth to effectively model our future growth?
Thank you, Abhishek, for the question. You are right that our Total Contract Value has been increasing much faster than our Annual Contract Value. This is partly due to the longer deal tenures. Our pipeline has a healthy mix of vendor consolidation and cost takeout deals, which typically have longer tenures, along with new opportunities in data, AI, and modernization. However, it's worth noting that large deals are currently dominating our pipeline in terms of value. Last year, we secured two mega deals, and we are starting this year with two mega deal wins in just one quarter. Consequently, the Total Contract Value driven by these large deals is indeed growing more rapidly than our smaller and medium-sized deals. This is in the context of weak discretionary spending, where the top priority for our clients remains cost reduction, which in turn influences their spending in new areas. This summarizes my view on the situation.
Sure. That's clear. Second question is on capital allocation. The last 2 payouts after the tax regime change has been in the form of dividends. So have we decisively moved towards the dividend route and is buyback now not in consideration?
We increased our capital allocation policy from 45% to 50% of net income, aiming for up to 70% over a three-year period. We have communicated that we still prefer dividends and buybacks as ways to return cash to our shareholders. In the January quarter and this quarter, we have issued dividends. Buyback remains an option, and we may consider it at the right time.
We'll take our next question from the line of Nitin Padmanabhan from Investec.
Aparna, I wanted your thoughts on the margins. You mentioned that many of these deals will have some impact on margins. Given that you will be executing a lot of these deals, do you think the current margins can be maintained? How should we consider margins moving forward?
We don't guide for margins, Nitin. We've had a very good run on operating margin improvement over the last 8 quarters. We are very excited with the quantum of deals that we booked. These deals prove the capability of us winning in large vendor consolidation. In fact, we shared that nearly a substantial portion of our large deals actually came from our top clients. So we're very happy with the win. Our focus and energy is going to be on conversion, right? A lot of these deals will ramp up over the next 4 to 6 quarters. These deals have a good balance of both renewing and an element of expansion. And the expansion will come through ramp-up consistently over the next few quarters, right? So all hands on the deck that will mean we will have to make certain upfront investments. And these are larger deals and are strongly contested. And therefore, the nature of the deals, the margin profile is weaker compared to the rest of the portfolio. So there will be some pressure. You've seen our ability to continuously improve our operating margins. Those operating levers will continue to remain at play. That's all I can share at the moment.
We'll take our next question from the line of Gaurav Rateria from Morgan Stanley.
Congrats, Srini; congrats, Aparna on good execution. My first question is on the kind of the deals. If you look at the last 1 year, the areas where we have won the deals, like the deal with the insurance on the claims side, the deal with the telecom player in the U.S. These are areas where Wipro has traditionally not been very strong or been present. So what tweaks we have made to be able to win deals, which probably traditionally has not been very strong for Wipro? So just trying to understand the initiatives taken around that.
Thank you for the question. At the beginning of last year, we indicated our intention to focus on being consulting-led and AI-powered. This involved identifying five sectors and specific industries within them where we aimed to establish a strong presence. To achieve this, we invested in developing domain expertise. Additionally, we secured significant deals with some of our top clients, as mentioned by Aparna. We also made it a strategic priority to invest in expanding our large accounts. These priorities, along with our commitment to developing industry and cross-industry solutions, have helped us understand what our clients are looking for, both in terms of their business needs and the experiences they wish to provide for their customers, along with modernizing their operations. We've leveraged AI to enhance efficiency, optimization, and speed. I find these deals particularly exciting, and that's why we have successfully captured some of the major opportunities we've discussed. Out of the 16 large deals, two are classified as mega deals, and one has the potential to reach that status, as highlighted in the three case studies. This approach has been driven by AI, consulting insights, and a thorough understanding of the client's environment. We will continue to pursue this strategy moving forward, while also being proactive in listening to and addressing our clients' needs.
Second question on you mentioned last time that there were certain pauses on large projects. You gave example also on SAP project that were paused by the clients. Have you seen any update on that? Have things started to move? And is this part of your guidance?
Gaurav, looking at the overall environment regarding tariffs, geopolitics, and the economy, there are specific sectors that have been significantly affected. We've noted the impact on manufacturing, particularly in automotive and industrial sectors, as well as retail and consumer packaged goods, which are heavily dependent on the global supply chain. One of the projects I mentioned last quarter is still on hold, as the tariffs are under evaluation. The client has paused this particular program for now, wanting to ensure complete clarity before moving forward. These types of projects, Gaurav, remain on hold. I'm optimistic that if conditions improve in the next few quarters, the client will return to invest in those transformation initiatives.
Last question on margins. I understand the puts and takes you explained on margins, especially on the large deals upfront investment. But fair to say that you aspire to be in the band of around 17% that you had been calling out in the past few quarters, keeping these puts and takes into mind?
Certainly, that remains a band that is where we would like to operate, Gaurav. But having secured these deals, our focus and priority is going to be to ramp up these deals and execute and deliver them. Therefore, there will be certain investments. So there could be certain quarters where we will have to make those investments. But you're right, when you say that 17% to 17.5% band that we called out earlier remains a band that we would like to operate in.
We'll take our next question from the line of Surendra Goyal from Citi Group.
So just one question on the deals again. Like how comfortable are you that the 10-odd percent increase on trailing 12-month TCV will translate into a meaningful growth acceleration? And the reason I ask is like in FY '23 also, we saw TCV was up 28% year-on-year, but FY '24 and FY '25, we saw a revenue decline. In that context, is it possible to provide any sense on the ACV growth even directionally?
Maybe I'll give my comment and ask Aparna to add to that. First and foremost, if you look at the opening remarks that I made, we had a very strong bookings in quarter 1. We have a very strong pipeline in quarter 2. I also said that our H2 will be much better than H1. This confidence comes based on the bookings that we have done. The point that Aparna talked about, we are now staying very focused on execution. Some of these deals will get transitioned and get to a steady state anywhere from 3 months to 6 months time frame. That gives us confidence to talk about the second half, Surendra. Maybe, Aparna, if you want to add some more.
Well, Surendra, your observation is right. Sometimes these TCV and ACV have a different growth trajectory given how long tenor deals keep getting signed and therefore what impact that has on conversion. The other factor that has come the way of the conversion has been just the discretionary spend environment and how there have been subsequent leakages on that count. For now, at least the discretionary spend environment seems to have stabilized. We were hopeful perhaps at the start of this calendar year that it would improve. But for the moment, I think the way we are looking at this financial year is going to be stable. If we keep that assumption in mind, you should be able to see a much better conversion of some of the bookings into revenue, Surendra. That's the endeavor.
And any comments on ACV growth, even directionally just for us to understand the trends a little better?
I think the ACV growth this quarter has grown well on a year-on-year basis as well. So this is not coming only on the back of longer-term deals. We feel fairly confident about these deals.
Sure. And just one clarification...
Things are also quite good. Yes.
Sure. Sure. And just one last question. Capco, you mentioned 6% year-on-year. Could you share the sequential growth number there?
We are not providing the sequential growth rate for Capco as it's part of all the units. An additional point we mentioned in our earnings or media interaction today is that we have achieved $1 billion in bookings over the trailing 12 months. This should give you a good sense of our performance. Even looking into the second quarter, we expect strong momentum and a positive trajectory as we begin the quarter.
We'll take our next question from the line of Vibhor Singhal from Nuvama Equities.
Congratulations on a strong performance in a challenging environment. My question is about Capco. You mentioned that Capco experienced decent mid-single-digit year-on-year growth. Could you elaborate on the overall environment we are facing? This includes post-tariff uncertainty, challenges, and discretionary spending being delayed. Given the nature of Capco's business, it likely reflects these issues, yet we are still seeing good growth. Do you believe this momentum will continue? What factors might explain why we've been successful while others are struggling? Any additional insights would be appreciated.
Vibhor, as far as Capco is concerned, just to add to what Aparna talked about in the context of the year-on-year growth and also the $1 billion booking that Capco did. We have seen Capco growth across U.S. and APMEA on a year-on-year basis, right? And growth is driven across insurance, wealth and asset management and energy to be very specific where the growth came. Also, there has been good momentum in both APMEA and LATAM, especially in Brazil, which is actually outside Capco's traditional geographies. So these actually helped us in the context of the growth and opportunities that we see going forward at Capco.
We have seen Capco grow significantly in the U.S. and APMEA compared to last year. This growth is primarily driven by sectors such as insurance, wealth and asset management, and energy. Additionally, we experienced strong momentum in both APMEA and LATAM, particularly in Brazil, which is outside of Capco's usual regions. These factors have contributed to the growth and the opportunities we anticipate at Capco moving forward.
Vibhor, I'm sorry, you're sounding muffled.
Yes. Sorry, I meant to ask, is the pipeline also looking good in Capco for the coming quarters?
Yes, it continues to look good for the coming quarters, Vibhor.
Got it. That's really helpful, Aparna. My second question is about the overall margins. I think there was a solid performance in this area despite the revenue decline. I apologize if you've already addressed this, as I joined the call late. Regarding margins going forward, do we expect to maintain the same trajectory of 17% to 18%? Or given the resilience we've shown, is there a possibility that we might exceed that range?
So we don't guide for margins unlike some of our peers. We have in the past shared that there is an aspirational band of 17% to 17.5%. If you look at quarter 1, we have landed somewhere in the middle of that band. But looking forward, our focus is going to be conversion of some of these mega deal wins that we've had, large deal wins that we've had. Some of these large deal wins will come with upfront investments and lower margins. So there are going to be pressures that will get created. We will have to offset them through better operational rigor and a lot of levers that are at our disposal. But it is going to be a work that cut out for us. That's all I can share at the moment, Vibhor.
Got it. Got it. So just last follow-up on that. So I mean, with all the headwinds in place of these large deals ramp up and all, we still aspire to maintain our margins in the 17% to 17.5% band range?
I mentioned that what we achieved in Q1 has positioned us well to enhance our profitability. Currently, our top priority is focused on growth and execution.
Next question is from the line of Ravi Menon from Macquarie.
Congratulations on the impressive deal wins. Srini, I'm a bit confused about your comments regarding the Americas. You appeared quite optimistic about the pipeline and demand in that region, yet when discussing individual industries, it seemed to indicate more mixed results, particularly with manufacturing, retail, and CPG, where you noted some weaknesses. Could you elaborate on the situation in the Americas? Additionally, can you address the decline in Europe this quarter? Do you see this as a temporary issue, and are you anticipating a recovery there?
Sure, Ravi. Let me take it one at a time. So if you look at the sectors in the U.S., we have BFSI. And like I said, that BFSI, the current pipeline is very strong and steady. Having said that, in quarter 1, we won 2 mega deals, which are very strategic for us as clients and also for the client bringing in the power of AI and bringing in our execution capabilities. In that context, in the U.S., BFSI, I see positive traction. Second is Technology and Communications, which is another sector of ours. There again, if you look at it, Ravi, we won a large deal, which is likely to be a mega deal. We are staying focused on that because both technology clients and communication clients are investing heavily in AI because they want to modernize their current software and platforms, which is one of our core and also it's also a strength because it's coming through our engineering domain. So that sector will continue to be positive for us. Third, in terms of Healthcare. Healthcare traditionally in the U.S., we've played a big role in the payers, providers and life sciences and that have continued to grow, and we see that to continue to grow. Some of the industry solutions around payers that we have built actually are resulting in good differentiation and wins for us in the healthcare sector. Fourth, like you rightly said, the consumer business has been a challenge. Within consumers, we have retail, CPG, and travel transportation. But if I look at the deal wins in quarter 1, specifically in the retail segment, we have had some good interesting wins. I think we are staying close to what's happening in the U.S. economy, how the tariffs will play in and how this particular business will keep changing or evolving. The last one is energy, manufacturing and resources. In that, you're right, manufacturing has been slow for us. We continue to stay focused because especially in the automotive segment, we have seen the challenges that companies are going through. We are also looking at opportunities where we can help them in the context of cost takeout. That is something we are proactively discussing with those customers. So that's how the U.S. and the sectors are playing out, Ravi. Now coming to Europe, right? The pipeline continues to be strong in Europe. In the BFSI sector specifically in Europe, we have a good pipeline. Having said that, the large Phoenix deal that we won in quarter 4, we are going through the final planning phases. The revenue will start coming in quarter 3, that can give a good momentum for us in Europe. Second, we also are staying focused on some of these deals which are cost takeouts and vendor consolidation. We have wins now. We have stories now. We have strength now. We will go back and bring that to bear in Europe. While the market in Europe is definitely uncertain, obviously, we have a good view on what's happening in each of the countries across the European Union. More important for us is staying focused on those clients and do the turnaround for us in Europe, which has not been greater in the last couple of quarters, but I'm very confident with the team that we have put together, the energy and enthusiasm they are bringing in and the pipeline they have, we'll get there.
A quick question on this restructuring cost about $2.4 billion. This is showing up, I guess, as the unallocated cost in the segmental reporting, right? And whenever we had something like this earlier, there was a detailed footnote explaining what is restructuring was due to and whether we are taking impairment charges. Could you talk a bit about what's the restructuring charge this quarter?
The restructuring costs pertain to restructuring in Europe that we did. This is very limited to a few associates in Europe, and this is one-off in nature and unlikely to recur. You're right, it is a part of the reconciling items and it's part of our EPS and our net income.
Next question is from the line of Manik Taneja from Axis Capital.
Congratulations on the positive internal developments you've shared. I have a question about the challenges we've faced in Europe. While the Phoenix large deal is beneficial and there's talk of a robust pipeline, could you discuss some of the customer-specific obstacles encountered in Europe over the past few quarters? Are those mainly resolved now? My first question. Secondly, even though we've been able to maintain our business with our top customers, which is reflected in our revenue performance, our client metrics appear to indicate some level of weakness. Can you elaborate on what might be causing this? Those are my two questions.
Sure, Manik. In Europe, we have said that it's a combination of both the macroeconomic environment, the discretionary spend environment and a few client-specific challenges. Client-specific challenges are now behind us. To say when would Europe bottom out and start performing, we do feel confident that in the second half of this financial year, we should start seeing some stabilization and growth in Europe. One, certainly because of the Phoenix deal win, also because we see some of these client-specific issues are behind us. More to be done. More is desired. I think Srini has spoken about a good pipeline. We will continue to remain focused on converting those pipelines and also remaining very close to our top clients in that region. And what was your second question, Manik? Can you just remind me?
That response helps. I was also trying to clarify our client metrics performance. So while one looks at our...
Yes, I now recollect your question. So yes, in some sense, if you look at the total number of active clients that has come down over a period of time, again, reflects discretionary spend environment. There's nothing strategic or intentional that we are doing in order to reduce any number of clients. But it's also a very, very ... we continue to also win the hunting logos, right, the big circle accounts where we would like to expand. That's something that we are doing, and we will continue to accelerate that momentum. We are also investing a lot in our large accounts. In some sense, you should look at our greater than $50 million accounts, they've actually grown quarter-on-quarter. We should continue to see momentum in our what we call as metal accounts. You will see that performance reflected there.
We'll take our next question from the line of Kumar Rakesh from BNP Paribas.
I have just one question, more of a clarification. So it seems like on margin earlier, when you used to talk about that it will be in a narrow band, one do seem to be focusing more on driving top line growth. Earlier, Srini had talked about that the priority would be on profitable growth, and you have spoken about that the second half performance would be stronger than the first half. Will you say that would also be reflecting in the bottom line growth as well? Will that also be better than the first half in the second half?
We don't guide for either the full year revenues or profit, right? Yes, in the last few quarters, we've been talking about narrow bands. In the last 8 quarters, we have consistently improved our margins. We've also created a good runway for us to invest back into our business. The deals that we have secured are in our large client relationships, and they will need certain investments we will have to make upfront. We will go ahead and focus on growth and execution. Eventually, yes, this will result in profitable growth.
I was trying to ask this question to understand what the lowest margin could be if you’re making investments. Earlier, we had seen periods where margins had fallen to around 15% while focusing on driving growth. Is it possible that for a few quarters, we might experience a similar decrease in margin as we ramp up deals, which could have an impact?
We are not sharing any commentary on that at this time. As I mentioned, our focus will now be on execution. We are in a good position regarding margins for Q1. We will proceed from there and keep the market informed about when some of these deals will start to ramp up, what we are able to offset, and how we can address some of those pressures. We will keep you updated accordingly.
We'll take our next question from the line of Sudheer Guntupalli from Kotak Mahindra AMC.
Congrats on a good quarter and strong deal wins. First question, on the deal wins spend compared to the long-term trend line of mix between net new deals and renewals, has this quarter seen any material divergence maybe in terms of skew towards renewal?
No, I don't think so. In fact, we have a good mix of both renewal and with an element of expansion in both the mega deal wins that we spoke of. One large deal where we have a potential to make it mega has a substantial portion of new in it. When you look at overall large deals, I think the mix of renewals and new is quite evenly poised, and in some time, we're excited about the bookings.
Sure. It is similar to what we had seen in the previous few quarters, right?
So Sudheer, just to reemphasize on the excitement that Aparna is talking about. These are all global companies. These are companies where we have a footprint. The good news is that we have secured our current book of work and now we are getting a new book of work. The focus for us is how do we maximize the new book of work. We are working through the planning process, and we will stay focused on executing those deals. It's a very, very intense focus on execution and delivering to our clients.
Got it, sir. And in your press note, Srini, you mentioned that discretionary spends are coming back in pockets, even if it is not in a uniform fashion. So can you elaborate on which pockets are those, which specific geographies and verticals apart from the BFSI which you spoke about?
See, Sudheer, broadly, if you look at it, the discretionary spend is coming around data, AI, and modernization. To just give you a little bit of color around that. For example, we have won a deal where we are transforming for a particular retailer, we call it as fashion intelligence; AI will know what to sell. This is a large American fashion brand wanting to enhance the sales by identifying and optimizing 40 product features per item. How do you display these features, whether it's in terms of the differentiation of the product, intelligently extracting and analyzing the impact on the market performance and helping their sourcing team make strategic product decisions. That's one example of a discretionary spend that integrates data and AI. Similarly, one financial services company is working with them on the power of intelligent automation and what we call smart credit decision. Right now, the client has a lot of manual credit risk operations. They are looking at how we can make this more AI-driven so that it is less error-prone and more accurate, so that they can disrupt the existing workflows. These projects are very important needs of the business; that's the discretionary spend. I have talked about entirely 2 different sectors. Those are just examples, to provide context, Sudheer.
Next question is from the line of Sandeep Shah from Equirus Securities.
Yes. Congrats on deal wins traction. The first question is when we say when we execute these mega deals, there could be a margin pressure because of the upfront investment. So I wanted to understand the nature of the investment and the margin pressure. Is it more competitive pricing because our EBIT margin is already lower than versus most of the other peers? So just want to understand. And second, these deals also involve some amount of higher pass-through sales or these are normal traditional type of a deals?
So Sandeep, first and foremost, none of the deals have the pass-through. Second, when Aparna said that we have to invest into these deals, this is the time for us to do the planning process because let's say, when there is a vendor consolidation, the kind of the teams that we need to put together, both in terms of program management, program delivery, and power management and so on and so forth, you've got to get the talent first, get them all acclimatize to the customers' environment and the process they do. These are all the investments that Aparna is talking about. Nothing to do with the pass-through, Sandeep.
Okay. Okay. Fair enough. And any comment on pricing? Are you believing the competitive pressure is very high because of macro? Everybody is now behind growth even in the large-cap basket?
So Sandeep, like Aparna said, right, some of these large deal wins are very competitive. There will be price pressures on that. What matters is how do you transition and how do you execute these deals. If you look at the current demand environment, I would say that each of these deals are extremely strongly contested. The good news is that we have won despite that competition. This is how the industry has always functioned. Everyone has to innovate and generate more savings while continuing to stay competitive.
Okay. And you also mentioned that we have to offset this with new levers and you believe there are more levers. So can you elaborate on the same because your margin execution has been really excellent, which has juiced out headroom in many of the margin levers. What are the pending levers which you believe can help you to offset some of these pressures? I think productivity in fixed-price programs, they continue to be a theme. I know we talk about it all the time, but with newer technology and a lot of AI focus, the productivity that we can drive is certainly a big lever. Secondly, even as we speak, there is margin improvement that we can make in some of our acquired entities and businesses as they go from strength to strength. There will be improvement in margins as they are all executing. Thirdly, if I had to look at it, we are continuing to optimize our G&A. Again, on the back of AI, on the back of a lot of process efficiencies that we are driving, that will continue to be a focus of simplification and reducing the number of layers. These have remained key focuses and we will continue to drive some of those levers. Apart from this, the traditional focus will remain utilization we've invested in. Maybe we will need to continue to invest in utilization for a little bit more. But other factors like pressure hiring, rotation, pyramid optimization, all of which become easier as we grow and win more programs, that will also be a focus. Over and above that, Forex has traditionally helped. That is something that is not within our control, but it’s also something that has played out in the past.
We'll take our next question from the line of Ashwin Mehta from AMBIT Capital.
Srini, in terms of the competition that you have won these deals against, who were the incumbents here? Was it largely the Indian providers or these were mostly MNCs?
Ashwin, I never talk about competition or name them. All I can tell you, Ashwin, is these were well-fought deals, very satisfying at the end of the day, Ashwin.
Okay. And just one follow-up. So given our commentary that Capco is growing at around 6-odd percent from a year-on-year perspective. The BFSI portfolio ex of Capco seems to have declined by 6% to 7%. So what is exactly driving that? Is it largely ramp downs at clients? Is it some share loss? So any color here?
I think these are largely ramp downs that have happened. We have spoken about even within BFSI, I think Americas is much stronger. Asia Pacific has also had a much stronger growth in BFSI. The weakness is largely emanating from Europe. We are very confident based on the deal wins and the bottoming out of some of the client-specific issues that we can look to stability and growth. Srini has spoken about 2 mega deal wins in BFSI. Phoenix is certainly in the same space that we had won in Q4. The second half onwards, things look more optimistic, all focused on execution. The restructuring charges we have taken are segment specific or across the board in Europe? They are across the board in Europe but very contained, the number of employees affected is very, very small and not material in the context of the overall business.
Yes. Yashashri, we can now close the call.
So since the last one, over to you, sir.
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.
Thank you. On behalf of Wipro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.