Wipro reported solid fiscal second-quarter earnings that, despite a continued soft spending environment, were in line with our expectations. IT Services delivered another good quarter, as the company was able to book a number of key contract wins. Management provided optimistic guidance for the upcoming quarter, and we will update our financial model based on these developments but do not anticipate a change to our fair value estimate or narrow moat rating at this time. We view shares as fairly valued.

Wipro was driven once again by solid growth in the IT Services segment (90% of sales), as revenue rose 2.7% sequentially (3.2% on a constant currency basis) to $1.63 billion. The company experienced growth across all verticals, while the contribution from top 10 customers rose 4.1% sequentially (to nearly 23%).

Wipro booked 45 new customers in the quarter (consistent with prior quarters), bringing its total to 942, and management highlighted a few multiyear contracts with United States banks, which should increase overall revenue visibility. The firm continues to see increased demand for analytics, cloud solutions, and application development, as well as an increasing focus in leveraging open-source platforms to better address client needs, which we believe is an encouraging sign.

Operating margin fell 200 basis points from the year-ago period but rose 60 basis points sequentially, due in part to currency benefits in the quarter. The firm experienced a small uptick in attrition, but the voluntary departure rate (13.5%) remains on a downward trajectory, likely aided by wage hikes initiated earlier this year.