Ladies and gentlemen, good day and welcome to the Wipro Limited Q3 FY23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode. 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 touch tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dipak Kumar Bohra, Senior Vice President, Corporate Treasurer and Investor Relations. Thank you. Over to you, sir.
Thank you, Inba. Warm welcome to our Q3 FY23 earnings call and wish you all a happy New Year. We will begin the call with our business highlights and overview by Thierry Delaporte, our Chief Executive Officer and Managing Director, followed by a financial overview by our CFO, Jatin Dalal. Afterwards, the operator will open the bridge for question and answers 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 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. Inba, you can open the call now. Over to you, Thierry.
Thank you, Dipak, and thank you everyone. Hello, good morning, good afternoon, good evening to you all. Thank you for joining our third quarter results. From our entire leadership team, I'd like to wish you first a fantastic year ahead. We are optimistic about 2023 to deliver groundbreaking work for our clients and continue on a growth trajectory. We'll talk about some of the opportunities that are ahead of us. Joining me today is our CFO, Jatin, you know him well, our Chief Growth Officer, Stephanie, our Chief HR, Saurabh, and I'm pleased to introduce you to our new Chief Operating Officer, Amit Choudhary. Earlier today, we reported our third quarter results, as you know. I'm pleased to share that we have delivered, one, another quarter of double-digit revenue growth.
Second, record order bookings of over $4.3 billion, led by large deals signing of over $1 billion. A margin expansion of 120 basis points. A huge surge in cash conversion and a fourth straight quarter of lower attrition. Looking at the macroeconomic environment, the macroeconomic uncertainty we had discussed last quarter continues with no doubt. However, tech spending remains robust. It's a reality. Our clients are looking for value-driven transformation, tighter governance, and improved return on investments. Cloud transformation continues to be a priority even as we see a higher focus on returns. It's against this backdrop that we have delivered our highest ever bookings in total contract value terms. Clearly, the investments we've been making in our clients, our efforts to bring about a shift in our portfolio and proactive deal shaping are all paying off now.
On a year-on-year basis, our bookings in total contract value terms grew 26% in Q3. We signed 11 large deals with a total contract value of over $1 billion. This strong booking trajectory translates into a 50% year-on-year growth in our large deal bookings on year-to-date basis. By the way, our pipeline of large deals is both strong and diversified. Looking at the markets, three of our four markets grew more than 20% year-on-year in total contract value terms as well. Some interesting insights worth mentioning here. One, our strong bookings were driven by Wipro FullStride Cloud Services and engineering services. These grew at 25% and 45% year-on-year, respectively. Second, our large deals include new and existing clients seeking a transformation partner or going through vendor consolidation.
Renewals with existing clients are often accompanied by services expansion, taking market share from others and frankly expanding into new areas of our clients' businesses. The deepening of our relationships with our clients is driven by our innovative solutions, is improved by improved delivery execution, by higher customer satisfaction scores, and finally, by a strong ecosystem partnership. Our customer satisfaction score has improved versus the previous century by 10 percentage points. The strong order booking proves, frankly, that our business strategy is working. Third point, our expertise in business transformation, coupled with decades of experience in delivering cost-optimal solutions, is the combination our clients are seeking in this market. A good example of this is a recent deal we signed with a U.S. based financial information analytics and ratings agency. The project involves integration and management of their infrastructure and security estate.
Let's turn to revenue growth. First, I'd like to note that over the last 10 quarters, we have grown at a very rapid pace. Our revenues have grown 45%, and headcount has grown by 40%. We are now much bigger in scale, in size, with the breadth of service offerings and deeper client relationships. In Q3, we recorded our 7th straight quarter of double-digit revenue growth. We grew 10.4% on a year-on-year basis and 0.6% sequentially in constant currency terms. Our sequential growth was impacted by furloughs as expected and lower discretionary spending by clients. We have continued to turn the tide on margins. The hard work we've put into improve our supply chain into delivery excellence, operations automation, has actually resulted in greater efficiencies.
All this has contributed to a margin expansion of 120 basis points quarter-over-quarter. Our operating margin, therefore, is now at 16.3% versus 15.1% last quarter. A little later, I'll ask Jatin to talk to you in more details about margin, but I do want to mention that this margin expansion is after absorbing the impact of three full months of salary increases that we've offered to our colleagues. It also factors quarterly promotions as well as the restricted stock units we've granted to our senior employees. Another good news has been on the cash conversion side. We saw robust cash conversion for the third quarter at 143% of net income. I will now share some details on our service offerings and sectors and how we are continuing to increase market share.
Market by market. 1, our market, our Americas 1 business grew 11% year-on-year in Q3. Inside the fastest-growing sector in that market was communication, media, and information services, which grew at 14% year-on-year. Looking now at Americas two business, it grew 9% year-on-year in Q3. Their manufacturing led the pack with more than 18% year-on-year growth. Besides energy and utilities, securities, capital markets, and insurance also recorded good growth of more than 12% each. Order bookings grew 40% year-on-year. Our business in Europe also has continued to be a strong growth driver. Double-digit growth for seven quarters in a row. Europe delivered a year-on-year growth of 12% in this quarter. Almost all the markets in Europe grew double digits, led by the Nordics, by U.K. and Ireland, by Germany, and Southern Europe.
The order book in total contract value terms grew also at 25% on a year-on-year basis. Our APMEA, which stands for our AsiaPac, Middle East, and Africa region, grew at 7% year-on-year in the third quarter. Regions that did, I must say, particularly well during the quarter were Southeast Asia, but also the Middle East. Our transformation efforts in this region have started yielding results. It's very visible. This quarter, we closed one of our largest deals in this market. The order bookings, they grew 22%. Looking forward, the pipeline is strong. I would say we've continued to strengthen existing client relationships, and I'm pleased to share that our top 10 clients grew 15% year-on-year, which also here confirm our strategy around growing large accounts. Let's look at the service offerings. IDeaS, iCORE.
First, our iDeaS global business line grew 12% year-on-year in Q3. This growth was led by, one, cloud, the cloud transformation part, which grew 27% year-on-year. Apps and data, which grew 18% year-on-year. Digital experience, which grew 16% year-on-year. Finally, engineering services, which grew 12% year-on-year. Looking at the iCORE part of the house, this global business line grew 8% year-on-year in Q3. Cybersecurity had the growth at 16% year-on-year, followed by digital operations and platform growing at 9% year-on-year for Q3. From a total contract value standpoint, cloud infrastructure, our CIS, business line grew over 50% year-on-year.
CIS revenues now are lower as are lower as we continue to rotate our existing portfolio and move towards the cloud, which is very in line with our strategy, you know. At the same time, we are signing long-term deals with clients in this business. We are continuing to evolve our FullStride Cloud Services business, creating new industry offerings, working together with partners, which is in fact helping expand our market coverage. FullStride Cloud Services continue to be a high growth area for us, contributing over 1/3 of our total revenues today. Our cloud expertise spans the entire spectrum of cloud services, from cloud strategy, migration, modernization, to full stack industry solutions and running and optimizing cloud. Partnerships continue to be a source of growth as well. Bookings with hypergrowth partners in Q3 continued to be strong, nearly $2 billion.
That's a 35% year-over-year growth. Bookings through hyperscalers today stand at 44% of Wipro's overall booking in terms of total contract value. Besides cloud, we are expanding capabilities in artificial intelligence, in data and engineering, increasingly going to market as one Wipro. These investments are getting noticed. A U.S.-based energy company has selected us to build an end-to-end greenfield fully automated warehouse in Europe. The project will allow the client to manage large sums of chemical storage while maintaining strict health and security requirements. This win, if we look at it, brings together our domain, our engineering, digital, cybersecurity, and health and safety capabilities. It also underscores how our advisory capabilities, technical and engineering expertise are differentiators for us in the market. Let me now turn to our most important asset, our people.
I am pleased to share that attrition continued to drop for the fourth straight quarter. In Q3, attrition dropped to 21% on the trailing twelve-month basis. Our quarterly annualized number, which dropped 360 basis points quarter-on-quarter, are now at 17.5%. We are confident that our focused talent strategy will result in continued moderation of attrition in the coming quarters as well, frankly. Second, we are recognizing and rewarding our talent, promoting a record number of colleagues in FY 2023, the highest ever in fact, with numerically 30% more promotions than in FY 2022. Our leadership team's breadth of expense, high performance standards, and strong collaboration continues to fuel our growth and our transformation. Finally, I'm encouraged to see more diversity in our leadership ranks, which has been a focus for the past several years.
Definitely we have more work to do here, we know that, but one promising change worth sharing with you is that we have more than doubled the number of women in senior leaderships roles at Wipro. As these visible, impactful leaders progress their career, they demonstrate the impact diversity has on our clients, on our business, and on our people. We've been strict about maintaining that focus on talent quality, high performance orientation, and inclusion in our graduate hiring as well. Year to date, we have hired and onboarded more recent graduates than the whole of previous years and actually ever before. As always, I'll close with an outlook for the full year. We expect full year revenue growth to be at 11.5%-12% in constant currency terms.
On margins, our Q3 number is now the new base, and we will look to improve it further. In summary, I'll say that we had an excellent quarter with record bookings, sustained growth, and delivery excellence. Our strategy continues to pay off, and we will remain on course. With that, I will hand it over to Jatin now for his comments.
Thank you very much, Thierry. I will quickly summarize the financial highlights for the quarter. We grew 10.4% year-on-year on constant currency terms.
Our margins expanded 120 basis points to 16.3 percentage points. If you see our Attrition, it was 22.9 compared to 21.5 last year, so that impacted little bit net income conversion. Despite that, sequentially, we delivered 14.8% growth in net income and 2.8% of Cash flow remains strong at 143.5% of operating cash flow as percentage of our net income. Our cash at the end of the quarter was $4.6 billion gross and $2.7 billion net. This is a volatile year and quarter on Forex. We had about $4 billion of Forex hedges, and our realized rate for quarter three was 82.24.
As Thierry mentioned, we have guided for 11.5%-12% growth in constant currency terms for the full year 2022-2023 at the exchange rates which are mentioned in our PR. Thank you very much for joining, and we'll be very happy to take your questions from here on.
Thank you very much, sir. 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, you are requested to switch to handset mode while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead.
Yeah, thank you. I hope my audio is clear.
Sorry, Mr. Garg. Could you switch to a handset mode? We can't hear you that well, sir.
Yeah. Is this better?
Yes, sir. Thank you.
Yeah. Sorry. I have two questions. You know, the first one was for Thierry and Stephanie, if she's there. I just wanted to better understand, you know, how should we look at the TCV number, the total number, not just the last deal. Because, you know, if you look at the Q3 print, your, you know, TCV of $4.3 billion implies a book-to-bill of, you know, almost 1.5x . You have been growing the TCV number quite handsomely over last, you know, few quarters as well. How should we think about, A, the duration of the deal wins, you know, which obviously will convert into revenues and, you know, when should that impact start flowing through?
You know, the revenue in last four quarters, you know, has the incremental revenue has been barely about $80 million, whereas your deal wins continues to grow in 25%-30% range. Is there, you know, something which is kind of impeding the conversion of these bookings into revenues over the last four quarters?
Mukul, Thierry, I will take your question. And Stephanie, if you want to add, of course, feel free. You know, Mukul, you're right. I think, you know, the performance in bookings has been good for several quarters. This quarter has been outstanding. I think we've really done a great job of, you know, not only developing our pipeline of deals, but also converting them into, you know, deals, contracts for us. We've actually seen. We've shown two things during this quarter or two confirmation, if you like. One is that, you know, we continue to see a lot of opportunities for us in the market, which confirms that this is still a robust market for us.
Second, that we continue to win well over competition. We continue to show healthy levels of win rate, if you like. From a type of deals standpoint, I would say, you know, yes, the investment made on large deals now, when was that? 18 months ago, is paying off a little more every quarter. It's 3M. It started with, you know, one big deal, and then, you know, few quarters later, another one. Then, you know, we are gaining in volume, but also in consistency. You hear from Stephanie that it's across the organization now. This is really reassuring because, you know that we get a lot of comfort from that.
I would add that there's also a promising volume of large deal in our pipeline. The conversion question, so the conversion of the revenue to bookings to revenue that you are asking. I think this is a reflection of a couple of points. Point one is there is no doubt that, you know, while, you know, the market continue to be good and the investment in tech continue to be good, there is a change that I called last quarter. You know, macroeconomic environment, you know, drives a certain volume of uncertainty, and that exists.
There are sectors, you know, everybody will now be surprised to hear that the tech sector is a sector that You know, certainly, felt quite, you know, really felt the impact of this change in macroeconomic environment. Secondly, is probably the fact that there is a potential, a slowdown of, you know, or more, I would say, volatility of the discretionary spend from clients. Third, what we are seeing is that, you know, there's not necessarily a slowdown of the decision process. If that was the case, maybe we wouldn't have had such a good quarter in terms of bookings.
I think the time it takes to ramp up, to launch and ramp up those programs behind may take a little bit of time, and we have to go with the pace of our clients in this context of uncertainty. An example of that is typically deals where there has been a consolidation of vendors that we have won and, you know, then there's a period of transition for the, you know, business to go from one partner to another. I think it is, you know, a fact of life that we have reflected in our projection. Certainly the performance in bookings, the volume of deals, but also the quality of our pipeline give us quite a nice level of confidence for the next year as well. Stephanie?
Yes, Thierry. I would just, you know, reinforce the your comment in terms of the health of our pipeline, the types of deals that we're winning. It is a mix of new clients. It's a renewal of existing clients who are expanding our scope. We're taking market share and vendor consolidation. It's also, a pivot of our portfolio to the new, and you heard us talk about the growth in full-stack cloud services. Very, very happy with our pipeline, the health of our pipeline for Q4 and even going into next year. Think our growth will continue and we'll start to see, you know, the revenue convert in future quarters.
Understood. Thanks. I had one quick one for Jatin. Jatin, I was a little bit confused, you know, with the employee cost number, which you printed this quarter. If you look at the cost per employee, excluding the subcontracting expenses, this was a quarter where two months of wage hike was flowing through. You also had promotions, you know, which kind of took place. Your employee cost per employee, in INR terms has been flat and actually declined almost 2% versus last quarter in USD terms. What really is leading to, you know, this flattish kind of a cost, you know, which I think, which actually has been managed quite well? What are the drivers which are helping you kind of keeping this under check, given that, you know, I think last few quarters have been exceptionally tough in terms of overall expenditure of own employees?
I think the most foundational reason, Mukul, there are three reasons I will go through each of the three. The one is, the most foundational reason is that we have improved the way we manage our supply chain. We have far more freshers who are part of our pyramid. Pyramid has continued to improve quarter on quarter. Second is the attrition is lower, which helps us manage the cost better because to that extent there is impact of premium which reduces of lateral hires. Overall, the most foundational reason is that we have managed our cost structure much better.
The third and, the, of course, the other third component is that we have released a lot of efficiency gains from our fixed price projects, and those get redeployed for our DNM and other work. Therefore, you don't need, your employee cost remains the constant wherever you are able to add revenue. These are the most foundational, as I said, the cost structure improvements that we have made. The second is also that if you look at it from a consolidated Wipro Limited standpoint, there was a restructuring cost which was sitting in the employee cost line, which was not counted towards the segment margins of 15.1% in quarter two, but it was sitting in consolidated line, which is not present now.
That reduced that shows a downward path on the employee cost. That is the second. Third is quarter three, typically, the employee cost also has certain amount of accruals related with leave and other provisions which takes it up or down. If you want to model it, you model it based on the first reason that I have shared, which is the more foundational improvement in the cost structure of our employees, and we'll continue to work on that. The second and third factor, the second factor was 1 quarter impact, which will not recur. The third impact is seasonal, which will come back in next December but won't recur in the future quarters.
No, that's quite helpful. Thanks for taking my question. I'll get back to the queue.
Thank you. Our next question is from the line of Abhishek Bhandari from Nomura. Please go ahead.
Thank you. Happy new year, Thierry, and the entire management team. Thierry, I just had, you know, one question...
Mr. Bhandari, I'm sorry to interrupt. Your audio is a bit muffled, sir. If you're on a speakerphone, switch to handset, please.
I hope this is clear now.
Yes. Thank you. It looks like Mr. Bhandari's line has just got disconnected. If he joins the queue, we will ta ke his turn. In the meanwhile, we'll move to our next question. That's from the line of Sandeep Shah from Equirus Securities. Please go ahead. Your line has been unmuted. Please go ahead with your question, sir. There seems to be no response from this line. We'll take our next question. That's from the line of Gaurav Rateria from Morgan Stanley. Please go ahead.
Hi. Thank you for taking my question. Happy New Year, Thierry. First question, any color on the percentage of renewals in TCV? Is it consistent with the historical, last few quarters or anything has changed? How should one think about, timing of ramp-up of the deals that you have signed in the current quarter? Would it be like a 1 Q phenomena? Would it be more like a 2 Q phenomena? How should one think about the timing?
You know, this is. Gaurav, first of all, happy New Year. You know, I, you know, to your questions, I would say first of all, the, regarding the balance, I was trying to remember. The balance between, you know, the new and renewal, I would say this is a, you know, as expected. You know, there's a healthy balance, I would say. From one standpoint, you know, the deals that, you know, we got, we managed to extend them to, you know, to sometimes, you know, widen the scope, increase our presence. That's also, you know, in particular when we've been able to consolidate some positions.
We've also had a good volume of, you know, new deals and which is quite, you know, comforting because we know that we will be able to continue to expand and grow those new accounts as well. This is a good balance, I would say, a good balance between the two. The second question that is, you know, about, you know, the timing things will take to ramp up, it's a difficult question if we are sticking to the rule that we are only guiding for the next quarter. What I would say is that for sure we are seeing growth ahead of first half. You know, this projection for Q4 certainly reflects for the reasons that I mentioned before, a little bit the way we are seeing ramp-ups happening. But, you know, it can only go up.
Got it. Thank you. Secondly, you know, you made a very interesting point on % of the order book coming through hyperscalers. How should one think about the nature of these deals? Is the contract profitability similar to regular deals, or there are different kind of nuances one has to keep in mind?
Well, the first point, Gaurav, you know, remember back, you know, mid 2020 when we started to lay out our strategy, you know, partners was at the center of it. The way we grow was, you know, connecting and engaging at the strategic level with partner was insufficient. We've clearly reorganized ourselves to be able to be a lot more relevant with them. We have, you know, we have built these teams, you know, globally with local connections under the leadership of our CGO function. This is paying off every single quarter ever since. At that time, I remember that, you know, the revenue we were getting from our top five or six partners was not exceeding a quarter of our bookings.
Today, you know, as you heard, you know, we are, you know, not that far from half of the bookings coming from our hyperscalers only. It gives you a feel for the volume of growth that we've been driving with them, but you know, in a very strategic way. Going to clients together, developing solutions together, you know, literally developing strategy and at, you know, going after the markets as real close partners. That is, you know. Now you can ask what type of deal? Typically, you know, obviously hyperscalers are, you know, involved in most of our cloud transformation deals. The whole strategy that we've developed around Wipro FullStride is been paying off as well.
You know, how you should see it as a relation that is accelerating, that is gaining muscle every day and will continue to drive growth. The margin profile actually is rather good. As you can imagine, if we are improving our operating margin so significantly, it's because, you know, the margin we are getting from our deals is going in the right direction. I think it's also, we all know that, and it's actually visible in our books that, you know, every time we are taking a winning deal that is more, you know, that where it's more value-based, if you like, you know, we are going to deliver better margins as well.
Great. Thanks for a great explanation. Lastly, if I can squeeze one. FullStride TCV grew 25%. This is in context of what we are kind of hearing in the market, that cloud spend is likely to moderate because of the macroeconomic environment. Would it be more a phenomena of market share gain for you, or you fundamentally believe that, you know, that slowdown in cloud spend?
May not necessarily have happened as it was feared. Thank you.
You, you know, it's interesting. Your question is a good one, Gaurav. I have a view on that. And let me tell you what I've observed, and I spend a lot of time with the hyperscalers personally, is that there was a gap in our. There was a shortage in our ability to deliver on their demand just because of the magnitude of the size of this market. The fact that they are slowing down doesn't necessarily mean much in term of impact for us. I believe that, you know, with the size of these hyperscalers, even when they are growing few percentage less, you know, we can still grow, you know, more or less at the same speed.
I remain very bullish that, you know, what, you know, talking about cloud and what is representing today, north of a third of our business will continue to gain, you know, growing in term of, you know, proportion of our revenue mix, if you like, going forward. You know, market may slow down. We may not slow down around cloud.
All right, very clear. Thanks a lot, and all the best.
Thank you. You too.
Thank you. Our next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Hello.
Nitin, hi.
Yeah. Good evening, and, very Happy New Year.
You too.
Thank you. I had a couple of questions. First is on Europe. I think it's been a little counterintuitive. Almost everyone has been sort of showing very solid growth out of Europe. The geographies which we thought were relatively stronger are actually much weaker. If you could give some color on what exactly are the dynamics at play here. That's the first question. I had one more after this.
You know, Nitin, I indeed, I am aware of, you know. I should not necessarily comment on, you know, relative trends versus the competition. I think in the case of Wipro, what is clear is that, you know, over the last years, we have completely changed speed, focus, attention, and, you know, our impact in Europe is different. There's no doubt.
I think the organization we've put in place with, you know, a focus on key strategic market, the leadership that we've, you know, either hired or promoted in these regions, the organization that we have reinforced, the connections that we have built with our clients, the intimacy, the ability to combine, you know, the power of our global network and, you know, very strong, impactful, legal, leaders in this market is making a difference. Yes, Wipro is a different competitor in Europe today than it was some years ago. Is it paying off? You know, I'm assuming yes. It's clear that, you know, yes, we continue to grow. We continue to see nice deals. We have a nice portfolio of clients in Europe and, you know, we will continue to gain market share in Europe.
Sure. The second one was more of a clarification.
Mm-hmm.
I think, the deal wins have been sort of, pretty, in the last three quarters have been pretty decent compared to the earlier quarters. You mentioned that, the conversion was low because of the environment. If I just look at, how we typically grow in a Q1, apart from one of the years where we had large deals and we grew pretty well, do you believe, is the understanding correct in terms of the commentary that, you think, the level of build in terms of the deals won is, sort of sufficient enough that despite those headwinds, you'll actually see an improvement next year, from a trajectory perspective on a sequential, growth rate, if you look at it that way?
Alternatively, maybe the flip side of the question is do you think the cautiousness by clients and the view on discretionary spends and all of those, you think that cautiousness should sort of dissipate maybe, as we get into the new year, in the next fiscal?
Yeah. Nitin, this is Jatin. here in IR, smiling because this is one way to talk about Q1 numbers that we don't want to talk about. We will give it a pass. We understand your question precisely. It's a great question, you know, we are not at a point in time we would answer that. Directionally, the fact that we are winning large deals with TCV, the revenue, the backlog is improving, and it will convert into revenue. It's difficult to pinpoint a specific quarter that will get the boost out of it.
Sure. Fair enough. Thank you so much, and all the best.
Thank you. We'll take our next question from the line of Ravi Menon from Macquarie. Please go ahead.
Hi. Thanks for the opportunity. First on the overall deal with that, it looks like that's really strong. How would you think about the market demand unit, especially deals say north of $50 million, after disclosures large deals? Would we continue to see that momentum, you know, even over the next quarter? Or do you think that position making is largely gonna be on hold?
Ravi, your voice came a little muffled, so I hope I understood the question, but I believe you are asking our views on the market itself. Okay? Am I correct?
Yes, Thierry, that's right. I was just asking about the deal pipeline. You know, do you think the position making could slow and therefore deal wins could get a little softer next quarter?
You know, when it comes to, projecting, bookings, you know, you can certainly base your level of confidence on the quality of the pipeline and on your trend of win rate over, you know, a certain period of time. If I base my judgment on that, I see that we have another solid quarter of bookings coming ahead of us. Will it be an as good as the one this quarter? That I don't know, I cannot tell. Sometimes it depends on one deal and, you know, it makes a big difference. I think, you know, very confident that, you know, it will be another solid quarter in term of bookings. Let's see how it goes, okay? A little bit of reflection on the market. Again, the softness of the economy, the uncertainty of the macroeconomic environment is a reality.
You know, I said it in this room three months ago, Ravi, at the time where not necessarily others were, you know, saying it. You know, this hasn't changed. This hasn't changed. In this context, I can only recognize looking at the consent and the activity in the field from our sales teams that the tech spending remain robust. That's clear, you know. I take obviously comfort from the fact that we are winning and that we are winning nice type of deals. If you look at, being a little bit more, you know, looking at the type of deals, you probably have noticed that we are talking about total contract value. We also look at the annual contract value. What's interesting is that the total contract value has been our highest ever.
The annual contract value performance has been also our highest ever. What it says to me is that we have a good volume of large deal, good volume of medium deal, and good volume of smaller deal. I think this taxonomy... I don't know if we call it a taxonomy or this good pyramid of size of deals also reflect also the fact that our backlog for the quarters to come is reinforcing and is getting stronger. You know, reasons for us to be optimistic for next year.
Right. next to the question, it's a bit of a revenue and margin question. if the demand is so strong in Europe, why are we looking at Middle East as a geography we talked about investing? I mean, you know, historically, we've, we are used to thinking about the Middle East as a relatively lower billing rate and lower profitability geography. Why not focus on the developed pockets, if supply is still tight there?
You know, this, you know, Middle East is a very important market for us. A very important market. In fact, you know, by size, Wipro is one of the big players in the Middle East. We are very proud of our business. We continue to invest in this business, such that we've decided to establish the headquarter of the region in Dubai for, you know, for APMEA region in Dubai. We have invested, we have invested in innovation lab, in capabilities. We have just decided to launch our capital business in the Middle East also a few weeks ago. We are very bullish about, you know, our the outlook of Wipro in the Middle East over the next quarters. It will continue to surprise.
Great. Thank you, and best luck.
Thank you. Our next question is from the line of Surendra Goyal from Citigroup. Please go ahead.
Yeah. Hi, Thierry. Just one question. How should we think about the correlation between TCV and growth? The reason I ask that question is for the past six quarters, whatever metrics you have disclosed, ACV or TCV, is up greater than 24% year-over-year, while growth in that period has gone from 25%+ YOY to a guidance of around 8% at the higher end in the coming quarter. Just wanted to understand how should we think about the correlation between TCV and growth? Thanks.
Surendra, since this is a little mathematical view, I will take it, Jatin here.
I understand math as well. No, go ahead.
Okay, Surendra. I would, I mean, I meant it didn't have a demand color, but more conversion point, so I would take it. The key issue is that, I mean, we have mentioned in last three quarters that in the first quarter we said our TCV growth is 32%, then 28%, and this quarter also has been very robust growth.
The conversion has two components. It has a future timing component, when does it convert? A second is clearly the immediate component, which is it converts into next quarter or, you know, in a 2-quarter phenomena, et cetera. You have to appreciate the fact that we have won a very large component of TCV and something that we also covered in TL's speech, is that a large component of that is in cloud and infrastructure services, which are typically long-ended contracts over 4-5 years. We can give you comfort that as we enter every quarter, we are entering with a superior backlog than what we are carrying in the previous quarter. The uncertainty around discretionary spend or the conversion of large deals continues to pay out in the immediate quarter.
You are not seeing this correlation in an immediate, 3/4 period that of 2022, 2023 that you have seen the results of. As we model it for future, we feel very comfortable that we are moving in right direction of securing a better book to carry as we enter 2023, 2024.
Jatin, the ACV that you were disclosing in Q2, Q3 and Q4 of last year was all in excess of 24% also. This question was more around like I am sure deals which would have been won then should have converted by now. Just wanted to understand it better, if you want to kind of take it offline, that's fine.
Yeah, and we take your point, Surinder. We can even in next quarterly commentary, we can cover this point specifically. We feel comfortable that the bookings in the current environment is the only way to continue to grow. Because uncertainty will always mean that in our business there is always a certain amount of projects coming to an end, and only way to continue to grow is to add more on the top. We feel comfortable, but we can cover it as we go forward.
Jatin, just one clarification. On your comments on the margin walk, you mentioned, like something on the employee cost, which kind of moved away from the per employee cost for IT services. Could you just, kind of elaborate on that? Could you also quantify it for us?
Yeah. Surinder, it is quite straightforward. When you see our employee cost numbers, you see it on a consolidated basis for entire Wipro Limited. As you know that we had a restructuring cost which was sitting in the company books, it was sitting in quarter two employee cost. When we published our segment results and IT services, not in IT services segment, it was sitting elsewhere. Clearly that restructuring cost has not recurred in quarter three, and that has reduced from quarter two to quarter three, that much cost in the employee cost line when you look at consolidated Wipro Limited books.
Could you quantify that, Jatin, just for our convenience?
Yeah. Yeah, I can quantify it, but you can also see it in last quarter's numbers or Aparna or Abhishek will give you shortly.
No, that's very helpful, Jatin. Thank you so much.
About INR 130 crores.
Thank you, Jatin.
Thank you. Next question is from the line of Manik Taneja from Axis Capital. Please go ahead.
Hi, thank you for the opportunity. I actually just wanted to get your sense around the margin improvement trajectory, given the fact that over the course of last 18, 24 months, apart from acquisitions, you've invested in terms of especially when it came to pressures. Now, it is getting much more moderated.
Sorry to interrupt. Mr. Taneja, it looks like there's an audio break from your connection. If you're on a hands-free mode, please switch to handset and speak, and you might have to repeat the question, sir.
Sure. Thank you. I'm on handset only. I'll repeat that question. The question was on margins. Over the course of last 18, 24 months, we've seen a revision in our margins because of the investments that we've made around our delivery in terms of, especially in terms of pressures, as well as some of the acquisitions that we made. Now given the fact that growth essentially is slowing down and hiring essentially is coming off, is there a timeline that you would want to essentially suggest as to us getting back to 18%, 19% EBIT margins?
Okay. Manik, you know, thanks for your question. As you can see, we have made a substantive move on margin in quarter three. Certainly we will protect this base and make an incremental effort for future. Right now, I don't think we should go ahead and quantify the quarter or year in which we will reach a particular threshold. Our effort clearly, as we articulated in past also, is that we will. These are not the margins we are satisfied with from a medium-term standpoint, and our trajectory or our goal for medium-term is higher.
We'll continue to make an effort. Please be mindful that in quarter three we have made significant movement. We'll have to sustain that and on that build it incrementally in next quarters.
Sure. Thank you. All the best for the future.
Thank you. Our next question is from the line of Abhishek Bhandarkar from Intraday Capital. Please go ahead.
Hi. Thanks for the opportunity and Happy New Year. Thierry, in the preparatory remarks, you mentioned about model slowdown in the discretionary spends. Was this comment related to Capco by any chance? Given the fact that, you know, you have a solid UK European presence, one of your competitors had highlighted that H1 could see, some of the deals, delayed deals could convert in the first half. Anything that you would like to comment on the same? Thank you for taking my question.
When I was referring about to discretionary spend, Abhishek, I was not referring to any unit specifically. It's a reality that applies to all kind of discretionary spend. As you mentioned, Capco, let me tell you one thing. The acquisition of Capco, which we've done one work back now, 18 months ago, was an extremely strategic acquisition. The purpose of this acquisition was to change game changers for us in the BFSI market. Be able to suddenly completely transform the type of conversation that we are having with clients in order to be able to really engage with them at strategic level and drive larger program. This is exactly what has happened. The performance of Capco quarter after quarter over the last 18 months has been very good.
Actually higher than what we had anticipated or expected at the time of the acquisition. That, you know, the strategic nature of the acquisition is a reality on the ground every day. That's. I just wanted to be clear about this, the Capco since you mentioned it. As for discretionary spend, I think it's the type of deals that the clients feel they can, you know, stop at any moment in time. This happened with every kind of clients, you know, across sectors.
Thank you. We'll take our next question from the line of Dipesh Mehta from Emkay Global. Please go ahead.
Thanks for the opportunity. Just on the deal, related question. If I look now, press release contain note 4, which include we report only gross deal intake and any subsequent cancellation, termination, and reduction is not the part of the number. Do we see any different trend, let's say, over last few quarters, particularly on the termination reduction side?
Uh.
Which could have implication about revenue growth trajectory compared to deal intake trajectory. Second question is about growth trend or demand trend. If you can provide some sense about communication, BFSI and consumer. Thank you.
Okay. Dipesh, thanks for your question. The first one, if I understand well, is about, you know, has there been more cancellation or termination? That's what I understood, right? The answer is, we have not, you know... Let's be very clear. We have not lost 1 single, you know, There was a question earlier in another forum about, you know, is it structural? It's not. We have not lost a client. We have not lost. There hasn't been, you know, a big termination or anything. It's not like, you know, there's been a particular loss. That's the nature of the discretionary spend or the nature of, you know, a slightly slower ramp up that is more explaining the revenue profile.
Jatin Dalal, you want to add?
No,
you're good? Okay. You know, Dipesh, if you are okay, I wanted to also clarify the earlier question by Surendra, so that we conclude this call answering every question. Surendra's question was for the clarification. I will mention that Q2, Q3, Q4, Wipro's ACV growth was quite high, and that was, I am repeating, 31%, 22%, and 33%. If I take the average of the three, it comes to around 28% growth in ACV. That if you see our 2021, 2022 growth in revenues, what was also 28%+. Our ACV growth did reflect in our revenue growth. Both numbers included Capco, they are apple to apple. Therefore, we continue to see a strong correlation of our booking business with revenue. If there are any other questions on this line, you know, IR team will be very happy to take it after the call.
Sorry. The second question, if you can answer.
sorry, Dipesh. Can you ask me again?
The second question was about the demand trend, what we are seeing in communication, BFSI and consumer verticals. Thank you.
Communication. No particular slowdown in communication. The market continue to be good. BFSI, we know by reading, you know, like you that, you know, there are some slowdown. We haven't seen it so far. The performance in BFSI continues to be good. I think it's probably, you know. Let's see. I think it's our ability to really connect at a more strategic level with our clients, which is getting us to places that are less exposed to cyclicity, if you like, or volatility. The third sector was?
Consumer.
Consumer. Consumer is okay. The consumer actually same thing. If you look at our performance, it's solid as well. I suspect, however, that it may be a sector between consumer and retail, in particular in America, which could get a little bit exposed in the foreseeable future. To follow.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference back to Mr. Dipak Kumar Bohra for closing comments.
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 day. Thank you.
Thank you, members of the management. On behalf of Wipro Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.