Wipro Ltd shares fell 7% on Monday after its December quarter (Q3FY26) results and management commentary signalled subdued revenue growth and margin pressure.
Despite furloughs, Q3 revenue growth came closer to the upper end of the guidance range of -0.5% to +1.5%. Sequential constant currency (CC) revenue grew 1.4%, aided by about 80 basis points (bps) contribution from the recent DTS Harman acquisition. However, other shortfalls prompted earnings downgrades.
Total contract value (TCV) of deals declined 29% sequentially and about 6% year-on-year to $3.34 billion, compared with over $4.5 billion in each of the previous two quarters. Wipro’s deal wins remain skewed towards large deals, which tend to be lumpy.
Large deal bookings in Q3 fell 69.5% year-on-year and 9.4% sequentially to $871 million. While the deal pipeline remains healthy, management flagged delays in the ramp-up of large deals won earlier. This could keep revenue growth uneven and limit near-term visibility.
Soft Q4 exit
For Q4FY26, Wipro has guided for sequential CC revenue growth of 0% to 2%, which includes an incremental two months’ contribution from the Harman acquisition. The guidance points to a soft exit, with fewer working days and delayed large-deal ramp-ups weighing on organic revenue growth.
As per Ambit Capital, Wipro’s revenue is set to decline for the third consecutive year in FY26 by 1.6%. A sharp rebound in FY27 appears unlikely despite better deal wins, as Wipro’s deal flow has historically been offset by leakages, while demand remains uncertain. Ambit added that year-on-year growth is likely to remain flat to negative in BFSI, consumer, energy, natural resources and utilities—segments that together contribute about 70% of Wipro’s revenue.
Margin pressures ahead
IT Services Ebit margin rose sequentially to 17.6% (excluding one-time restructuring charges), aided by rupee depreciation, improved utilisation and cost control. However, management expects margin dilution from the Harman acquisition, given its relatively lower margin profile. Potential wage hikes could further pressure margins.
As a result, Wipro’s margin gap with peers could widen. The company is confident of sustaining margins in the 17–17.5% band. PL Capital expects full integration of Harman to dilute IT Services margins in FY27, before integration benefits begin to accrue in FY28. It estimates margins at 17.4% in FY26, 17.1% in FY27 and an improvement to 17.5% in FY28.
Wipro shares trade at a FY27 price-to-earnings multiple of 19x, lower than larger peers trading at over 20x. This valuation gap is likely to persist—and could widen—if Wipro’s earnings fail to catch up.
