Wipro Q1 Preview: Under pressure from AI, what can investors expect from earnings?

IT services major Wipro is expected to report a 12% year-on-year (YoY) rise in revenue for the June quarter, helped by acquisitions and currency movements, even as its core IT services business is likely to remain weak on a sequential basis. Net profit is estimated to grow about 2% from a year earlier, according to the average estimates of six brokerages.

Analysts expect delayed deal ramp-ups, weakness in banking and financial services, wage increases and investments in artificial intelligence to weigh on profitability. The focus will be on Wipro’s guidance for the September quarter, the pace of conversion of large deal wins into revenue and management commentary on demand in the US and Europe.

IT services revenue may decline sequentially

Most brokerages expect Wipro’s IT services revenue to fall between 1% and 1.5% quarter-on-quarter in constant currency terms.


Nuvama expects a 1.5% sequential decline in constant-currency revenue and a 1.8% fall in dollar terms. Its estimate includes a 0.6% contribution from the Mindsprint acquisition.

Nomura forecasts a 1.3% decline in constant currency, close to the lower end of Wipro’s guidance range of a 1% decline to 1% growth for the June quarter.

Motilal Oswal also expects a 1.3% sequential fall, despite an estimated 1% inorganic contribution from Mindsprint. It said delays in deal ramp-ups, weakness at a large client and softer demand in the US banking and financial services segment could offset the acquisition benefit.

Systematix expects revenue to decline 1.5% in constant currency despite contributions from the Olam-linked business, while Kotak Institutional Equities forecasts a 1% sequential fall.

Kotak said the delayed closure of the Alpha Net acquisition could reduce June-quarter revenue by about $5 million compared with what had been assumed in Wipro’s earlier guidance.

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Margins face pressure from wages and deal ramp-ups

Brokerages expect Wipro’s operating margin to weaken as the company absorbs wage increases and upfront costs linked to recently won contracts.

Nuvama expects margins to fall by 130 basis points sequentially, affected by large deal ramp-ups and two months of wage hikes.

Motilal Oswal estimates a 110-basis-point decline in the IT services margin to about 16.1%. It expects wage increases, lower-margin contract ramp-ups and AI-related investments to weigh on profitability.

Nomura sees an 80-basis-point fall, while Systematix expects a decline of about 50 basis points.

Kotak is more optimistic and expects margins to remain broadly stable, with the benefit of rupee depreciation offsetting the impact of lower revenue.

September-quarter guidance may stay weak

Most analysts expect Wipro to issue a cautious revenue growth outlook for the September quarter. Nuvama and Nomura expect guidance of a 1% decline to 1% growth in constant currency. Systematix expects a range of a 1.5% decline to 0.5% growth, including acquisition contributions.

Kotak expects a weaker range of a 2% decline to flat growth. It said continued uncertainty in client spending and the impact of AI-led productivity on traditional IT services pricing could result in a subdued outlook.

The guidance will be closely watched as Wipro has continued to lag some larger Indian IT services peers in organic revenue growth.

BFSI and large deals in focus

Analysts expect the banking, financial services and insurance vertical to remain under pressure due to client-specific issues, delayed project ramp-ups and softness in discretionary spending.

Manufacturing and healthcare may also remain subdued because of tariff uncertainty, seasonal weakness and cautious client budgets.

Investors will track management commentary on the consulting business, large deal pipeline, total contract value conversion and the outlook for major accounts.

Wipro’s strategy to deal with AI-led pricing pressure will also be important. Analysts want clarity on how the company plans to offset productivity-related revenue deflation while increasing investments in AI capabilities.

Other areas to watch include Wipro’s global capability centre strategy, integration of recent acquisitions and its timeline for closing the growth gap with peers.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)