Wipro set for Q1 revenue drop as AI and wages squeeze margins
Wipro is expected to post a sequential revenue decline and contracting margins as artificial intelligence pricing pressure and banking sector weakness overshadow recent acquisition gains.
Analysts expect Wipro to report a decline in IT services revenue and shrinking operating margins for the June quarter, highlighting the immediate financial toll of artificial intelligence on traditional IT outsourcing. Brokerages broadly forecast a 1% to 1.5% sequential drop in constant-currency revenue, driven by delayed deal ramp-ups, weakness in a major banking client, and sluggish discretionary spending.
Recent acquisitions are providing only a partial buffer against the downturn. Nuvama estimates a 1.5% constant-currency decline, factoring in a 0.6% boost from the Mindsprint acquisition, while Motilal Oswal forecasts a 1.3% drop despite a 1% inorganic contribution. Kotak Institutional Equities projects a 1% decline, noting that the delayed closure of the Alpha Net acquisition will shave roughly $5 million off the quarter's top line compared to prior guidance.
Profitability is facing simultaneous pressure from wage increases and the upfront costs of onboarding new contracts. Margin forecasts range from a 50-basis-point drop estimated by Systematix to a 130-basis-point contraction predicted by Nuvama. Motilal Oswal expects an 110-basis-point decline to roughly 16.1%, factoring in AI-related investments. Kotak remains the outlier, anticipating broadly stable margins due to a favorable rupee depreciation offsetting the revenue shortfall.
Cautious September guidance expected
The focus will quickly shift to Wipro's forward guidance, which analysts expect to remain subdued. Forecasts for the September quarter range from a 2% decline to 1% growth in constant currency. Kotak warned that ongoing client spending uncertainty and the impact of AI-led productivity on traditional IT pricing could push management to issue a particularly weak outlook of a 2% decline to flat growth.
Beyond the immediate numbers, investors are looking for management's strategy to navigate AI-driven revenue deflation. The banking, financial services and insurance vertical remains under severe strain from client-specific issues and budget caution, while manufacturing and healthcare are expected to stay subdued due to tariff uncertainty. Market participants will be listening for concrete plans on integrating recent acquisitions, converting total contract value into revenue, and ultimately closing the organic growth gap with larger Indian IT peers.
