Ladies and gentlemen, good day and welcome to the Q1 FY 2023 earnings call of Wipro Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Ms. Aparna Iyer, Vice President and Corporate Treasurer. Thank you, and over to you, ma'am.
Thank you, Inba. A very warm welcome to our Q1 FY 2023 earnings call. We will begin the call with business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing Director, followed by financial overview by our CFO, Jatin Dalal. Afterwards, the operator will open the bridge for Q&A with our management team. Before Thierry 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 SEC. Wipro does not undertake any obligation to update forward-looking statements to reflect the events and circumstances after the date of filing.
The conference call will be archived, and a transcript will be made available on our website. Over to you, Thierry.
Aparna, thank you. Hello, everyone, and absolutely good evening. Thank you for joining our Q1 earnings call. Let me first tell you that as I speak to you today to show our financial performance, I'm both humbled and excited. Humbled to have had the honor of leading this incredible company for exactly two years now and excited for what lies ahead of us. As always, I'll share with you a view on the demand environment and also offer some details on sectors, markets, service offerings, as well as business outlook for the quarter ahead. Despite the uncertainties of the macroeconomic environment, if I look at the pipeline, our order bookings and the discussions we are having with our customers, there has been no slowdown or pullback of spends for us. The demand for our IT services is robust, and I must say I'm thankful for that.
Our overall pipeline is actually, in fact, at an all-time high, and it continues to be renewed as we are winning deals at a pretty good pace. High-growth services like cloud, like digital, like engineering services or cybersecurity are seeing definitely strong interest from our clients. Led by our FullStride Cloud Services, more than half of our bookings today are attributable to these strategic focus areas. We believe this rotation to high-growth areas is going to accelerate. Our bookings in cloud are up 35% year-on-year, and engineering services booking literally doubled. Overall, now, bookings for the quarter were very solid. Our bookings in total contract value, TCV terms, grew at 30%+ year-on-year and in annual contract value term, ACV, it grew 18% year-on-year.
Three of the four markets grew upwards of 25% year-on-year in TCV terms. I've shared this with you in the past, the large transformative deals are a key pillar of our growth. Well, they provide, we know that, excellent opportunities to showcase our capabilities and scale. But I tell you, I'm pleased to share that our large deals bookings were nearly $1.5 billion this quarter, which is almost 3x of what we did, for example, last quarter. The majority of these are new. Our revenue growth during the quarter was at 2.1% in constant currency terms and 17.2% year-on-year. We grew 15%+ year-on-year across all markets. We are investing heavily in talent to support our ambitious growth plans for the year.
We added as such 15,000 net new talent during the quarter. In line with our strategy to reinforce our cloud and consulting capabilities, you probably remember we acquired and we completed the acquisition of Rizing last quarter. Rizing is a global SAP consulting firm, one of the leading strategic partners in the world for SAP. Rizing will become a critical extension of Wipro's SAP cloud practice, but also Wipro FullStride Cloud Services. Our Q1 operating margins, as anticipated, were lower at 15%. This is because we're investing in solutions and capabilities for us to further strengthen our position as a strategic partner for our clients. We've also accelerated structural transformation by investing in freshers, in particular, and in our own IT that will help drive operational efficiency and agility.
The inorganic bets we made to accelerate our growth are presently diluting our margin by 2.3% as a reference. At 15%, we believe we have bottomed out, right? I will now provide some finer details on markets, on service offerings, and on sectors. All markets grew double digits, with the Americas and Europe, our top two markets, growing at 18% and 16% for the quarter in year-on-year constant currency terms. Let's go through each of these regions in detail. In Americas 1, we grew 20% year-on-year in the quarter, with all sectors showing strong growth. During the quarter, technology products and platforms grew 37% year-on-year. Communications, media, and information services grew 26% year-on-year. Now let's look at Americas 2. We grew 17% year-on-year in Q1.
Financial services and manufacturing, those two sectors led the performance, recording a growth of nearly 30% each year-on-year. This order book in total contract value terms grew nearly 30% year-on-year in Q1. Now let's look at Europe. Our European business delivered a year-on-year growth of 16% in the quarter gone by. U.K. and Ireland, Southern Europe, and Benelux grew at or over 20% year-on-year. Our pipeline here is robust, and we have won many large deals in the market. Our order book in total contract value terms grew at 40% year-on-year. Finally, our APMEA business grew at 15% year-on-year in Q1. The regions that did particularly well during the quarter were Australia and Southeast Asia. Here also, overall, the order bookings in total contract value terms were very robust, growing at 60% year-on-year.
We said it, you know, as part of our strategy, continuing to strengthen client relationships remains a top priority. We have created a segmentation strategy to grow in key markets by not only deepening our relationships with our existing clients, but also bringing on new clients who are looking for a strong business and technology transformation partner to help them digitize their business. As I mentioned earlier, we are pivoting our go-to-market investments to allow us to do this. As a result, our top five clients grew 26% year-on-year, and our top ten clients grew 22% year-on-year, both in constant currency terms. If we look now, in the last 24 months, we have doubled our clients in more than $100 million segment to 2020, so from 10- 20.
We also added eight clients in the more than $50 million segment just in the last 12 months. Now, from a service offering standpoint, our iDEAS global business line grew 21% year-on-year in Q1. This growth was led by, one, digital experience, 25% year-on-year. Two, domain and consulting, which grew over 45% year-on-year. And three, engineering services, which grew 18% year-on-year. Our second global business line, our iCORE GBL, grew 11% in Q1. You will certainly appreciate that this performance comes against a backdrop of accelerated rotation of portfolios to the high-growth areas I talked about earlier. You know, cybersecurity services led growth with 34% year-on-year in Q1. Improved customer and employee experience are definitely fueling this growth in iCORE.
Our customers want us to reimagine what I would call traditional services such as end-user computing services and human resource outsourcing. Leading with business solutions has been one of our key differentiator. Our role as a cloud ecosystem orchestrator with Wipro FullStride allows us to increase opportunities to grow our business. Last month, we hosted our first-ever FullStride Sales and Partner Summit, featuring 23 of our cloud partners. Together, during several days, we strategized around new opportunities and committed to working together to help our clients transform in the cloud. There was tremendous energy across our teams. In the market, we are partnering closely with Microsoft, for example, to help one of our large healthcare clients transform their legacy infrastructure to Microsoft's cloud.
Our engineering services have grown at a compounded growth rate of 4% over the past four quarters, which is showing the consistency in growth. In the depth of our services and capabilities here, I can proudly say that we are a true leader in engineering services. This week we have launched Wipro Engineering Edge, our full stack portfolio of engineering services. We know this will enable our clients to innovate at scale. This also extends our engineering heritage by combining capabilities such as cloud, 5G, AI, Industry 4.0, IoT, and silicon design. Engineering Edge is already having an impact in the market. For example, a leading mobility technology company has chosen Wipro as an extension of their global engineering team to support them on the development of software-defined vehicle applications. High demand around SDV these days.
We also won a multi-year engagement with a leading U.S.-based semiconductor corporation to provide VLSI and system design services across a variety of products globally. We will help meet the quality standards required of semiconductor chips used in applications such as high-performance computing, self-driving cars, design and visualization, deep learning, AI. I will share a couple of examples before I move on. Wipro has won a very strategic engagement to assist in the digital transformation journey of a leading U.S.-based fund administrator. We will provide a range of services, including digital contract management, cloud migration with Wipro FullStride Cloud Services, quality and process engineering, as well as create a talent transformation roadmap for the client's workforce. Wipro has also entered a multi-year strategic agreement with one of the world's leading energy technology companies. Here, we will reimagine the employee experience for the firm's 70,000-plus employees across 75 countries.
I'll now share a view of our talent landscape. You may remember I had shared earlier about a shift in our talent strategy towards fresher intake. In line with that, we have onboarded more than 10,000 freshers in Q1. Now, while we are on the subject of talent, I want to share that our attrition has continued to moderate, right? That's three consecutive quarters of improvement in employment retention, in reality. In Q1, it was down to 23% on the trailing twelve months basis. We expect further moderation ahead. Our talent investments, I believe, are paying off. That's what it says. If you recall, we announced moving to a quarterly promotion cycle, which will be effective, actually July 2022, and salary increases for all those eligible in September of this year. Before I close, I will share an outlook for the next quarter.
We have guided for a revenue growth of 3%-5% in Q2, which will translate to growth of, to be precise, 11.62%-13.8% year-on-year in constant currency terms. With this guidance for Q2, let's be clear, we will very comfortably grow in double digits for fiscal year 2023. In summary, all our markets are growing. We have doubled our 100 million strategic clients. Our order bookings are strong. Our pipeline is at an all-time high. I must say I'm very optimistic about the rest of the year. With that, I'll hand it over to Jatin Dalal now for his comments. Thank you.
Thank you, Thierry. I'll share some data points. As you know, we grew 17.2% year-on-year in constant currency terms. We delivered a net profit of INR 25.6 billion. Our ETR for the quarter was 23.7%. As you know, that's an industry-leading ETR. We had hedges of $3.9 billion. The exchange rate realization for quarter one was 77.81. On a trailing 12-month basis, we have converted 68% of our net income into operating cash flow. As at the end of the quarter, we had $3.9 billion of gross cash on the balance sheet and $1.7 billion of net cash on the balance sheet.
As Thierry mentioned, we have given a robust revenue guidance of 3%-5% for quarter two at the exchange rates which are mentioned in our press release, and we'll be very happy to take your question from here.
Thank you very much. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Anyone who has a question may press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.
Thanks, and congrats on doing a great job on attrition here. Thierry, just a big picture question for you. Now that Capco's anniversary as we speak, at this point, you're not gonna get the contributions from Capco that you've had. How do we try to fill in that gap down the road? Obviously, you spoke about some of the different areas that you're focusing on in terms of high growth initiatives. Maybe you can get some color on that and some detail on strategy. Thanks a lot.
Moshe, hi, and I hope I will answer your question. Your voice came a little muffled, so I hope I got that. I certainly understood you were asking about Capco. Actually, Capco acquisition was finalized about a year ago, right? We celebrated one year of Capco in the Wipro family a few weeks ago. I can tell you one thing. It has been an absolute success. Obviously, always early to say after one year, but frankly, the way the team has integrated and maintained the focus on the market, the way this team has continued to play this role and started to connect with the Wipro BFSI business to develop, you know, common go-to-market strategy with our key clients has been really remarkable.
Capco has performed quarter- after- quarter. The growth has been extremely strong. Capco has not seen any acceleration increase or anything of attrition after the acquisition. Capco is very much involved into our deals. And frankly, we are not seeing slowdown in the growth of Capco. The performance in bookings in the last two quarters of Capco has been solid. This quarter, again, the pipeline is strong. So, you know, we know that, you know, typically sometimes, consulting business are more exposed when there is a slowdown, but this is not what we are seeing. I think it comes from one aspect. One, it's the quality of the relationship built by Capco with these clients. One. Second, the fact that it's truly connected to their digital transformation.
You know, I think they are on the right topic. Third, you know, we are seeing a certain shift somewhat in, not in the volume of opportunity, but the type of opportunities of clients who are still looking to transform, but with the objective to drive more productivity improvements. Capco is very much geared to address these challenges as well. At the end of the day, Moshe, you know, Capco is going well and is a very solid contributor to our performance.
Again, just as a follow-up, now that you're anniversarying that acquisition, are you comfortable that you're gonna be able to sustain the growth that you've seen? I'm talking more about the year-over-year growth comps that seem to be, I guess, moderating, in Q2 versus Q1. Thanks a lot.
The answer is yes.
All right. Thanks, Thierry.
You're welcome.
Thank you. We'll take the next question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah. Hi, good evening. Thierry, I would kind of add onto, you know, probably your broader consulting piece. In your last two years, you have added, you know, quite a chunky bit of consulting revenue to Wipro. Given the recent macro environment, what are the risks you are preparing for in this business? Because, you know, the past experience suggests to all of us that advisory work generally slows down at a faster pace compared to the demand which is out there for the cost optimization piece, you know, which generally gets highlighted during weaker times.
If you can just, you know, highlight both from a cost aspect as well as, you know, how you are managing, or looking forward, to the growth in the consulting business, over the next one year, it would be great. I also had a question for Jatin. Jatin, you know, how should we see the wage cycle play out, after the shift to the quarterly promotion cycle? I think Thierry just mentioned that the wage hikes have been pushed out to Q3. Is that the right assumption? You know, besides utilization, what other immediate levers do you have, which can help you pick up the margins over the next two quarters?
Mukul, let me take the first question, and then, you know, I'll pass the mic to Jatin. I suspect your question was specific to consulting, but broadly looking at the different consulting component of the business. At Wipro, we really have a consulting business that is really very much connected with our technology business, right? You know, it's not uncommon. The proportion of our business that actually combine consulting and technology capabilities is important, okay, is significant. Those are not standalone consulting business, just selling to, you know, different type of clients.
I think it changed a lot, the landscape, because the reality is that, as you said, I mean, like, you know, let's start with what we're hearing. I mean, like you, we are listening to, you know, what the analysts, the market, journalists have to say about macro environment. You know, when we hear that, we obviously get. We pay attention to the potential implications for our business. You know, important is the connection with our clients, right? I'm speaking to clients every single day.
You know, discussions about macro environment, again, they are like us, seeing, you know, those same signs, you know, between, you know, a war on one side of the world, inflation, you know, interest rate, potential clouds on the economy in a given country or another. They also have learned over the last two years that technology, when I say they have learned, either they knew it or they have, you know, they have reinforced the conviction during the last two years, that technology is not a cost center. It is a driver of transformation.
Now, what might have happened or might happen now, Mukul, is that in some cases, where companies were driving program to drive, you know, to develop new business models or, improve experience, I think they are possibly more gonna focus on driving productivity gains and reduce the cost of running the business. That's completely fitting with our, you know, capabilities and solutions that we have. We are indeed helping them leveraging technology to drive, you know, the transformation and improve their productivity. At the end of the day, consulting is an integral part of our go-to-market strategy. They are working with our technology teams. They are developing opportunities in the pipeline. They're winning deals together.
You know, if you look at the Rizing business, we already have several leads where the Rizing team and the SAP team of Wipro are working together. If we talk about Capco, you know, the first question was on Capco. We have had more than 60 joint wins in the last 12 months. This is really what's driving the growth. At the end of the day, I confirm today, we are. On one end, I don't want to be arrogant. I want us to continue to stay vigilant and observe the market and see and be ready to react when there are different sides. Okay. That we cannot predict always.
What I'm telling you is that as we speak right now, you know, booking performance solid for Q1, I should say even extremely solid, pipeline all-time high and extremely good engagement with our clients. The level of confidence on our growth going forward is solid. Jatin, on question two?
Yeah. Thanks, Thierry. So Mukul, let me articulate the levers that can help us improve margin from here on. I see six levers. The first is clearly utilization. As you know, it is visible in data sheet before including freshers or excluding freshers, you will see around 5% away from what was our peak utilization. That's first. Second, subcontractors. As borders and travels were difficult, all of us, and particularly us, have accumulated certain amount of subcontractors, which we will be able to moderate every quarter going forward, and that should provide additional lever because the cost of subcontractor is typically about 30% higher than your own employees. That is second. Third and most important lever is the pyramid and fresher improvement.
As you know, we have hired in FY 2022 more than double of freshers that we have hired in FY 2021. In FY 2023, we will hire another more than double. Which means that our ability to correct the pyramid through consistent improvement of the base and moving people up through the pyramid would be a big structural lever. In fact, that is the only lever which can reduce the cost pressure that we have seen in last 18 months. The fourth lever is pricing power. The attrition on one hand, and our ability to position ourselves very differently.
For example, the Edgile acquisition puts us in a very different space of consulting in cybersecurity, and the rates there reflect very differently than what you would see in a traditional managed services business of Wipro. Pricing for right services. Cloud is another area where we have invested heavily, and our ability to command price there is definitely much better than the traditional areas that we work in. That's the fourth. The fifth is attrition itself, because one of the biggest impact on our cost structure is when you are simply replacing similar skill and similar capability and similar experience, but you are paying premium to a lateral of 25%-30%.
As we spoke about and as you are aware, the attrition is moderating, and that should certainly give us leverage. Finally, the operating leverage as we work through, as the growth comes back, not all cost structure should go up in line with the growth of the revenue. There are levers. I do not want to, for a second, believe that there are not sufficient levers in our business to get back to a structural superior position from the margin standpoint.
Thank you. Just, if you can clarify on the wage hike part after shifting to the quarterly promotion cycle. That's all from my side. Thank you.
We are not making any shift. We have said we will give wage increases on first September, and we have given the promotions from 1st July, and these are the areas of investment for quarter two.
Thank you.
Thank you. Our next question is from the line of Kumar Rakesh from BNP Paribas. Please go ahead.
Hi, good evening, and thank you for taking my question. My first question was on your earlier commentary on margin in previous quarters, where you had talked about a margin guidance of 17%-17.5% for foreseeable future, and below that for the next couple of quarters. Where do we stand on those commentary, and specifically about the band of 17%-17.5%? By when do we expect our business to get back in the context of potential macro headwind in the second half.
Rakesh, thanks for your question. You are absolutely right. In the beginning of last quarter, we said that we will be away from the range of 17%-17.5% for a few quarters. That was also purposeful because we were planning to invest in the business, apart from the fact that some of the operating expenses were coming back, like travel and facilities. Those investments have been made, you know, roughly of the 2 percentage point, 1.5 percentage point comprises of 20 basis points for the Rizing acquisition dilution for a month or so.
More importantly, nearly 1.3% is on three areas, utilization, which I spoke about before, subcontractor, and some of the internal investments where we have made in IT to make ourselves far more efficient, agile and productive over a period of time. Those investments have been made. We said this is the bottom. From here on, our endeavor would be to come back to the guided range that we spoke about before. However, we will calibrate it every quarter. We are not giving a time window or a when, by when we'll come back. For quarter two specifically, I spoke before that we will have to invest in talent. Whatever efficiency gains we are making, it will get invested back into the business in quarter two.
Beyond that, we will talk at the end of quarter two rather than making a comment beyond that today.
Thanks, Jatin Dalal, for that. My second question was around the Capco acquisition. One of the rationale we had at the time of Capco acquisition was that it will give us a scale in BFSI and also the consulting capability which comes with Capco should help us in start delivering strong growth in the BFSI vertical. Over the last few quarters, we have seen how the BFSI vertical has been doing reasonable growth, but it hasn't been outperforming the industry per SE. Are we still seeing the benefit yet to accrue from that acquisition in the BFSI space, or is it something which we are happy with what we have achieved so far?
Rakesh, you know, we always expecting always more in terms of growth. The reality is that our BFSI business today is growing 24% year-on-year. I think what is very visible and comforting for us is that not only we've driven growth in terms of, you know, in terms of volume, if you like, but also in terms of positioning in those accounts. We have increased the number of large accounts. We have changed the nature of our relationship with our clients, and we are a lot more able to work with them on more strategic initiative than we were in the past. I think it's absolutely certainly we can do more and we will continue to do more.
We have continued to reinforce our setup, if you like, to trigger even more impact on the larger accounts. Frankly, you know, I think we can say after a year that it's really a success. 24% year-on-year is a decent growth, I would say.
Thank you, Thierry, for that. I have more questions, but I'll fall back and let you. Thank you.
Thank you. Our next question is from the line of Sandeep Shah from Equirus Securities. Please go ahead.
Yeah.
Thanks for the opportunity. If I just look at one metric of revenue per employee, on a YoY basis, it has gone down by 8%, in the IT services, and this is despite high revenue yielding companies acquired like Capco, Rizing, and Edgile as a whole. What are the reasons for the same? I do agree utilization has gone down, but that explains partly, not fully as a whole. What are your views? Is it some traditional business has a higher pricing pressure?
No, hi, Sandeep. Let me answer that question. If you see the overall offshoring trend continues to be very favorable to Wipro. When the offshoring trend is favorable to Wipro, you would realize that I mean, realization is one-third in India, so that has definitely played out in terms of IT services per employee realization coming down. I am not seeing from a pricing power standpoint any concern where we are giving away price discounts. In fact, I would think it could be a little bit of portfolio play. In fact, I would believe that if you adjust for offshore, you will see a strength there because we have added Capco, we added Edgile, we added Rizing, which are significantly higher realization generative business by design.
Okay. Just in terms of the consulting companies which we are acquiring, like Rizing as well as Capco, and Thierry's comment about. Yes. Can you hear me?
We lost you for a few seconds, Sandeep. We heard Capco and then you
Yeah. Just a follow-up question in terms of the consulting company like Capco and Rizing, and Thierry your comment regarding sensitivity to macro issue are slightly higher for these consulting businesses. How flexible we have in terms of a cost management within this company as a whole, both in Capco and Rizing? If slowdown happens, you believe the margin of these companies can slide? If we try to manage the margin, you believe we are running a risk of a high attrition as well in this company?
I tell you one thing, we have the obvious levers to pull to improve, you know, the margin of our consulting business, in particular Capco but also Rizing, which is to continue to develop the offshore component of this business. We have a lot more to do in that area, so, you know, certainly we will do it. For the rest, I think we've also triggered a certain volume of cost synergies between this business for Capco. For Rizing it's obviously very, very new, so nothing for now. I think, you know, we will continue to work on those aspects as well. Jatin, you want to add something?
Thanks, Thierry. Only additional point I want to make is these are not small businesses. These are large businesses with right amount of governance of the profitability management, where they have been in existence for a long period of time. They have seen ups and downs. They are able to carry themselves through one phase to the other. We remain quite optimistic that right now we don't see anything, but even if two years down the line there is a downturn, you know, we would be able to manage the cost structures quite well.
Thank you. Our next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Yeah. Hi, good evening. Thanks for the opportunity. You are pretty bullish on growth itself based on the pipeline and the kind of deal wins that you've had. Just wanted some color on what you saw this specific quarter considering that the organic growth was just around 1%. Is it the annual productivity benefit cycle that sort of driven the weakness? Or is this something that you had anticipated earlier, or was it a surprise? Just broad thoughts and anything from a vertical standpoint would help.
Nitin, honestly speaking, if I'm not wrong, for six quarters, we have guided every quarter between 2% and 4% growth. For six quarters, we have guided, we have delivered north of the middle of the guidance and sometimes above the guidance itself. In early Q1 we said, "This quarter we see a little less than 2%-4%." It doesn't necessarily reflect a slowdown. It's just, you know, sometimes because you have a deal that is, you know, starting here or the previous quarter you had a bigger deal or just the nature of the type of deal, you see a little less. We guided 1%-3%, and we are delivering right in the middle of the guidance.
When we guided on 1%-3% for Q1, what we said, we said two things. We said, one, I mean, frankly, we've been delivering north of 3% for six quarters in a row, and you could expect that one quarter you have a little less and then another one you have a little more. Second, that it was not reflecting any more profound, more deep trend of our business. You know, the performance in bookings in Q1 is just confirming this. We've done really well in the business, in our bookings in Q1 across all markets and across sectors. We have a good mix of small deals, medium deals and large deals. We've closed 18 large deals.
We've had, you know, 3x in terms of performance of what we had done a quarter ago. I think it's also, I would say it's all the efforts, you know, and investment made over the last quarter that are paying off. When you combine, you know, the visibility we have on our backlog, if you like, account by account, that you add, you know, the booking performance of the quarter, I think that's how we are coming with a guidance that indeed is rather strong for Q2 of 3%-5%.
Sure. Actually, the context of the question was that, historically, we have always seen a weak Q1 for Wipro. The thought process was, that this should sort of come down with the acquisitions in terms of that seasonality. Although it has come down a bit, but what we were trying to sort of understand was, is this here to stay in terms of seasonality and then should sort of slowly sort of reduce, on a going-forward basis for Q1? I was thinking more from that aspect than trying to nitpick Q1.
Nitin, I'm challenging the seasonality aspect of the growth. You know, I'm not—I don't think there is necessarily a seasonality, an inevitability to Q1. I don't see it, especially that Q1 is. Actually, our Q1 is Q2 for some other companies. I don't really understand the rationale behind that. No, I think don't assume that, and don't assume that there is any seasonality between a Q1 and a Q2. I think it's the flow of business that are delivered every quarter. We had done very well in bookings in Q4, but we had said at that time that, you know, it was mostly driven by smaller and medium deals. We had less large deals, okay?
I think the volume of large deals, and we all know that the volume of large deals is driving a little more growth, and that's what we are seeing for Q2.
Sure. That's very helpful. Just one quick question for Jatin, if I may. Jatin, the wage increase cycle we have shifted to September. It starts September. It's exactly the same as what it would have been if it was, if this shifted by a quarter. That's the way I should think it. October, November, December will be a full quarter of impact for that, and the quantum of increase will broadly be the same.
You know, quantum of increase will be something that Saurabh will determine closer to the date, as he gauges the environment. You know, what I want to remind all of us is that it is. I think the wording shifting is a little misplaced because, you know, we had our last salary increase in September of last year. It is 12 months from there, and we are giving our increases after 12 months. It is not a shift for majority population, more than majority population of the company.
Nitin, if I can just build on what Jatin said. Keep in mind the fact that, you know, we're now moving from a yearly cycle of promotion to a quarterly cycle of promotion, it has also some real implication from, you know, a compensation standpoint.
Sure. That really helps. Thank you so much, and all the best.
Thank you.
Thank you. Our next question is from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi. Thanks for taking my question. I have a couple of questions, so I'll go one by one. The 18 large deals are very strong performance. How much of that was led by improved win ratio for Wipro? Or how much is because of overall market being pretty strong for large deals wins in the last quarter? The related question is that, how should one think about the contractual profitability in these large deals? Has anything changed compared to the past, in terms of, gross margins coming down, because of macro or things are pretty much stable?
Okay, Gaurav, here I'll hand it over to Stephanie, our Chief Growth Officer.
Thank you, Thierry, and thank you, Gaurav, for your questions. You know, we've seen tremendous momentum in large deals, both in the quarter and in the deals that we closed and also in our pipeline overall. The market is certainly creating these large opportunities, but we're also winning more. So our win rates are up. Our strategy to invest in the large deal team is paying off, and we're seeing a lot of momentum in the market. In terms of margins, you know, we are seeing margin pressure on more commoditized type services as we compete for those. But a lot of our deals are actually more transformational in nature, where we're delivering on outcomes for clients and therefore, you know, we can value price our opportunities. It's a bit of a mix right now.
As we continue to pivot our portfolio and position ourselves better as an orchestrator for our clients on delivering those outcomes, we anticipate seeing, you know, margin improvement as well in our deals.
Thank you for that. The second question is on Europe. You talked about couple of regions blocking more than 20% growth, but overall Europe was I think 16%, so there were a couple of regions that clearly dragged down.
The overall growth there. You know, what were the factors that drove that? Is it something again related to the external environment or is it more a Wipro specific phenomenon?
I'm not sure I understood. I know you it was about Europe, but what was the?
Yeah. Gaurav,
Gaurav.
Yeah.
Gaurav, let me just chime in here from a clarification standpoint. Thierry mentioned in today's meeting as well as in his opening commentary that Europe remains a very strong region for us. The only reason you are seeing a slightly muted growth is Europe had a fabulous growth in Q1 of last year.
Mm.
Which was from the first April onwards. I mean Europe was at an extraordinary base to climb on and that's the reason you are seeing a little muted. We remain very confident, including the deal wins that we have seen in quarter one, as to how Europe will pan out for quarter two.
Hey, Gaurav. Thierry. Now I understood the point. When you look at a growth per quarter at the level of a region, it's sometimes slightly misleading because of a deal like, you know, Metro kicking in one quarter or another, you have suddenly a step change and therefore, you know, the next quarter is compared with a challenging baseline. If you look at the performance of Europe, two data points. If you look at the performance of Europe year-on-year, it's 16% growth this quarter, so it's solid. What we see from Europe for Q2 in terms of sequential growth is solid as well. So you know, no. We had our board over the last two days.
Our Pierre, our Head of Europe was here, and we have had the opportunity to discuss with him also his perception on, you know, the market in Europe and so on. He doesn't see signs of slowdown, frankly. Again, quite the opposite, given the volume of nice deals, new deals that he has won in Q1, the ones he has in the pipeline for Q2, I think there's a good level of optimism among his team at the moment for Q2 and beyond.
Okay, thank you. Those are all my questions. Thanks a lot.
Thank you.
Welcome.
Our next question is from the line of Dipesh Mehta from Emkay Global. Please go ahead.
Yeah, thanks for the opportunity and congrats for decent growth acceleration outlook. Couple of questions, starting with first clarification. I think Jatin, earlier we indicated by Q4 we should be achieving our medium-term margin aspirations. I was not sure what you said in answer to one of the questions earlier. Are we maintaining those kind of outlook when by Q4 we should have normalized margin trajectory? That is question one. Second question is about cash generation. If I look this quarter, cash generation went fairly weak. If you can provide some sense about what played out there. Last question is about iCORE revenue. This quarter it is flattish quarter-over-quarter, despite cloud, cybersecurity is part of that service line. If you can provide some sense what is playing out there. Thanks.
Sure. Dipesh, let me clarify that I did not say that by quarter four it is going to be a particular range that we mentioned before. What I said that we have bottomed out. In quarter two particularly, we will have whatever operational efficiency gains we'll get, we'll invest back into the promotions and the salary increase. From here on we'll continue to calibrate upwards, but we'll guide you on that on a quarterly basis rather than telling you a particular quarter or timeframe around it. That was the commentary that we have made since in press conference as well as in the earlier part of earnings call. Your second question on cash.
Yes, it has been a slower third quarter from cash standpoint, but we are very confident that we'll catch it up in quarter two. On your question on iCORE growth, you know, a part of iCORE is also our digital operations business, which has a reasonably large presence in our HPS business, which sees a great momentum of open enrollments in quarter four, which it did not have in quarter one. Therefore, while Cybersecurity and infrastructure business continued to do well, we had a little bit of moderation through our DOP business, purely on the seasonality of our open enrollment business. That is the reason that there is a slight moderation there.
Understood. Thank you.
Thank you. We'll take our next question from the line of Sandip Agarwal from Edelweiss. Please go ahead. Mr. Sandip Agarwal, could you please unmute your line and go ahead with your question?
Yeah, good evening, and thanks for the opportunity. So I have one question on the demand side. While you know, you have reiterated that you know, we are probably seeing worst times behind, but if we do the adjustment for the acquisitions, still our outlook doesn't look very exciting. Is there some conservatism which you are building in or you think that you know, it is best to wait and watch and see how things pan out because of the tremendous amount of fear which is there for the macros? That is part one of my question. Part two, when you talk to your clients now versus earlier, that is two years back, is there a substantial change in their mindset regarding investing in technology, in the sense that they
Do they believe that, you know, despite challenges in the macro, it will be very important for them from a long-term perspective to invest in technology so as to, you know, maintain their market share or grow their market share going forward? Or you think that again, the dominance of costs and efficiency are on their mind rather than growth when it comes to tech spend? What is your assessment?
Okay. Sandeep, let me start with the clarification. You're saying our guidance 3%-5% growth for this coming quarter is conservative and not exciting, is what you're saying?
I'm saying it looks little conservative when we adjust for the acquisitions.
Sorry for that. You know, I think we'll go with this guidance. For sure, trust we will do our best to surprise you, okay? We didn't say Sandip, we didn't say that the worst was behind. Actually, we've never said that there was any worse. I think we are, you know, connected with the market every day. You know, we are seeing that we are saying that the demand that we have seen in the last quarters continue to be good. That's what we have said, huh?
This is in terms of market outlook, frankly, there is demand for technology expertise, capabilities, talent, and you know, the in the areas that we are talking about cloud, engineering services, cybersecurity, data, digital transformation, we have plenty of opportunities, okay? That is, you know, again, we are trying to be realistic in our guidance, okay? We're not trying to be conservative nor being overly optimistic, okay? This is definitely not our way of guiding, okay? Is that okay?
Yeah, that's okay. I just wanted to understand a little bit more that how your clients are thinking now, given the current macro thinking about doing.
Our clients. It's always difficult to respond in few minutes to a question like this because clients have, you know, different industries, different reality, different markets. But I think what's visible. See, Sandip, a week ago I was in London visiting one of the largest insurance company, speaking to the CEO. He has, you know, absolutely no intention to reduce the spend in technology. In fact, at no point in time in the discussion did we ever discuss, you know, the concern about the cost of technology. What they are looking for is really more, you know, the outcome, right? What is it going to drive?
I think that's why I believe that, you know, in the way we are structuring our proposals to our clients, we are getting their attention when they can see immediate impact of the technology investment into productivity gains. It doesn't mean 100% of the programs are with that in mind, but I think there is a growing focus on this in the current macro environment.
Okay, thanks. That's very helpful. Thank you.
You're welcome.
Thank you. Ladies and gentlemen, we take that as a last question. I would now like to hand the conference over to Miss Aparna Iyer for closing comments. Over to you, ma'am.
Thank you all for joining the call as always. 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 day. 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.