Wipro gains pre-earnings as analysts flag margin pressure
Wipro shares ticked higher ahead of quarterly results, but analysts warn that weak demand and rising AI costs will likely pressure both revenue growth and margins.
Wipro’s stock climbed as much as 1.51% to an intraday high of ₹177.42 on the National Stock Exchange on Thursday as the Indian IT services company prepared to release its June quarter results. The shares opened at ₹175.60, slightly below the previous close of ₹175.65, before gaining momentum.
The pre-earnings rally, however, faces headwinds from the underlying financial metrics. Brokerage firm Axis Direct forecasts a marginal 1% quarter-on-quarter increase in revenue. This limited growth is expected to be partially offset by the higher contribution from Wipro's Harman acquisition, which is helping to mask delayed deal ramp-ups and client-specific issues.
Profitability is under direct pressure. Axis Direct expects EBIT margins to decline by 84 basis points quarter-on-quarter. The firm attributes this contraction directly to wage hikes and higher artificial intelligence investments, which are weighing on profitability while revenue growth remains muted.
A challenging macroeconomic environment across key international markets continues to suppress client budgets. Seema Srivastava, Senior Research Analyst at SMC Global Securities, pointed to weak discretionary spending and delayed client decision-making. She noted that demand remains particularly soft in the banking, financial services, and insurance (BFSI) vertical, as well as in technology and communications, reflecting continued budget conservatism.
Investors are now focused on how quickly Wipro can convert its deal pipeline into actual revenue. Srivastava highlighted that the market will closely scrutinise management's commentary on Q2 FY27 revenue guidance, the pace of large deal execution, and the broader timeline for an IT spending recovery.
Despite a recent market correction that improved Wipro's valuation, active investors are reluctant to build aggressive positions. Harshal Dasani, Business Head at INVasset PMS, noted that valuation support alone cannot compensate for subdued organic growth. “Until then, the risk-reward appears balanced rather than compelling, making it prudent to wait for greater earnings visibility instead of taking an aggressive position ahead of the results,” he said.
The immediate trajectory of the stock will be dictated by the company's forward-looking statements rather than the retrospective quarterly data. “The stock's near-term direction will largely depend on the results and outlook for demand, deal wins, and revenue growth rather than pre-result expectations,” said Mahesh M Ojha, VP Research & Business Development at Kantilal Chhaganlal Securities.
