Wipro shares fall on margin squeeze as AI hits traditional IT demand
Wipro’s stock dropped more than 2% after quarterly results showed shrinking margins and weak guidance, prompting brokerages to slash price targets on the Indian outsourcer.
Shares of Wipro fell 2.67% to ₹173.05 in early Mumbai trading on Friday after the IT services company reported a 4.2% sequential decline in first-quarter net profit to ₹3,352 crore.
The drop in earnings highlights the continued pressure on India's fourth-largest IT services firm as it navigates a costly transition toward artificial intelligence. While headline IT services revenue rose 1.8% quarter-on-quarter to ₹24,453 crore, it contracted 1.2% in constant currency terms.
Profitability absorbed the brunt of the quarterly strain. IT services operating profit fell 5.7% to ₹3,919 crore, with EBIT margins contracting by 130 basis points to 16%. The company attributed the squeeze to recent wage hikes, the costs of integrating acquisitions, and heavy ongoing investments in AI infrastructure.
Forward guidance offered investors little immediate relief. Wipro expects second-quarter IT services revenue between $2.574 billion and $2.627 billion, translating to constant currency growth ranging from -1.5% to +0.5% sequentially. The board declared an interim dividend of ₹2 per share.
For market professionals, the results underscore a structural shift in enterprise technology spending. “While AI continues to expand the long-term opportunity, it is accelerating the shift in enterprise spending towards AI, data and cloud, while compressing demand for traditional IT and BPO services,” said Choice Institutional Equities.
The brokerage noted that while Wipro maintains a healthy deal pipeline, prolonged client decision cycles and pricing pressures are delaying near-term growth. Emkay Global analyst Dipeshkumar Mehta pointed to delayed ramp-ups of previously won large deals and persistent weakness in banking and healthcare accounts amid a challenging macro environment.
Brokerages responded to the earnings by cutting their forecasts and price targets. Emkay retained its "Reduce" rating and lowered its target by 15% to ₹170. Motilal Oswal reduced its fiscal 2027 earnings estimate by 3.5%, kept a "Neutral" rating, and set a target of ₹160, projecting flat to slightly negative constant currency revenue for the full year.
Choice Institutional Equities also trimmed its earnings estimates for the current and following fiscal years. It assessed the risk-reward as unfavourable at current valuations, assigning a "Reduce" rating and cutting its target price to ₹170 from ₹185.
