Wipro shares fall 3% on weak margins, cautious Q2 revenue guidance
Wipro's stock dropped more than 3% after missed margin targets and a downbeat second-quarter forecast overshadowed an 11% year-on-year revenue increase, prompting analysts to slash price targets.
Wipro shares fell more than 3% after the Indian IT outsourcer reported first-quarter earnings that missed margin estimates and provided a weak revenue forecast for the current period.
The company posted revenue from operations of Rs 24,479 crore, up 11% from Rs 22,135 crore a year earlier. However, constant currency revenue declined 1.2% sequentially. The EBIT margin came in at 16%, falling short of the 16.5% consensus estimate.
Management attributed a downbeat outlook to macroeconomic uncertainty and geopolitical instability. Wipro guided for September-quarter IT services revenue between $2.574 billion and $2.627 billion, implying a constant currency sequential range of -1.5% to +0.5%. This guidance includes an estimated 70 basis points of inorganic contribution.
The weak forecast triggered a round of target price cuts across the analyst community. Nomura maintained its Buy rating but lowered its target to Rs 190 from Rs 200, noting the second-quarter guidance was slightly below expectations even when factoring in the inorganic boost.
Nuvama also kept its Buy recommendation, cutting its target to Rs 210 from Rs 255. The brokerage pointed to Wipro's 7% dividend yield and a valuation of 13 times forward earnings as reasons to hold the stock, though it trimmed FY27 and FY28 earnings estimates by roughly 2% and reduced its FY28 valuation multiple to 15 times from 18 times.
Motilal Oswal took a more cautious stance, maintaining a Neutral rating with a target price of Rs 160, implying a 10% downside. The firm expects flat to slightly negative constant currency revenue growth for the full fiscal year, citing a slow first half, delayed deal ramp-ups, and uneven vertical recoveries. It cut its FY27 earnings per share estimate by 3.5% as artificial intelligence investments and wage hikes offset operational gains.
The divergent analyst ratings highlight a market split between investors valuing Wipro for its high yield and those unwilling to look past a prolonged period of stagnant organic growth. The company declared an interim dividend of Rs 2 per share.
