- Wipro stock slid nearly 7% on guidance that fell short of analyst expectations.
- Revenue grew 3.3% QoQ but missed street forecasts, raising doubts about deal momentum.
- Analyst split: Nomura stays bullish on valuation, Jefferies warns of margin pressure.
- Sector peers TCS, Infosys, and HCLTech are posting stronger guidance, widening the performance gap.
- Historical patterns show that a guidance miss in Indian IT can precede a multi‑quarter earnings correction.
You missed the warning signs in Wipro’s latest guidance—and your portfolio may be paying the price.
Why Wipro’s Guidance Miss Raises Red Flags for the Indian IT Sector
The company projected March‑quarter IT services revenue of $2.635‑$2.688 billion, implying flat to modest 0‑2% growth in constant‑currency terms. That is well below the 5‑6% sequential growth consensus among sell‑side analysts for the sector. In a market where earnings are increasingly driven by high‑margin digital transformation deals, flat growth signals weaker pipeline strength.
Guidance is the forward‑looking compass investors rely on. When a firm issues numbers that fall short of consensus, the market often reacts faster than on actual earnings, because expectations are already baked into the price. In this case, the near‑term guidance gap eclipsed the modest profit dip (4% QoQ, 7% YoY) that Wipro reported.
Sector Trends: Slowing Deal Momentum Across Indian IT Giants
India’s IT export engine has historically benefited from a global appetite for cost‑effective software services. Over the past 12‑18 months, however, three macro forces have begun to erode that tide:
- Currency headwinds: A stronger rupee reduces the dollar‑denominated earnings of Indian exporters.
- Geopolitical realignment: Clients in the US and Europe are reshuffling budgets toward on‑shore or near‑shore solutions.
- Talent scarcity: Competition for AI‑savvy engineers has pushed wage bills higher, squeezing margins.
Top‑line growth for the sector has cooled from double‑digit rates in 2021‑22 to the low‑single digits today. Companies that can sustain >4% sequential growth are now viewed as outliers, and investors are rewarding them with premium valuations.
Competitor Snapshot: How Tata, Infosys, and HCLTech Are Navigating the Same Waters
While Wipro’s guidance fell short, peers have managed to keep the growth narrative alive:
- Tata Consultancy Services (TCS): Forecasted 5% YoY revenue growth for FY24, backed by a surge in cloud migration contracts.
- Infosys: Projected 6% sequential growth, citing strong demand for AI‑enabled platforms.
- HCLTech: Offered a 4% sequential increase, buoyed by a strategic acquisition in the cybersecurity space.
These firms have also emphasized margin expansion, targeting 21‑22% operating margins versus Wipro’s 20% range. The divergence in guidance is creating a clear relative valuation gap: Wipro now trades at a 12‑month forward P/E roughly 10% below its peers, but the discount could deepen if deal flow stalls.
Historical Context: Guidance Misses and Their After‑effects in Indian IT
Looking back, three notable guidance shortfalls provide a cautionary template:
- In FY19, a major IT firm missed its FY19‑20 outlook by 1.5% and saw its share price tumble 12% over the next two quarters, only recovering after a strategic partnership announcement.
- During FY22, another player issued a flat‑growth forecast amid macro uncertainty; the stock entered a 15‑month downtrend, eventually exiting the Nifty 50.
- In FY23, a guidance miss was followed by a restructuring plan that restored investor confidence, but only after a 9% price correction.
The pattern suggests that a single guidance miss can trigger a multi‑quarter valuation penalty, especially when the market perceives execution risk.
Decoding the Jargon: Margin Discipline, EPS CAGR, and Deal Momentum
Margin discipline refers to a company's ability to keep operating margins stable or improving despite revenue fluctuations. It is a proxy for cost‑control and pricing power.
EPS CAGR (Earnings‑per‑Share Compound Annual Growth Rate) measures the average yearly growth rate of EPS over a multi‑year horizon, a key metric for assessing long‑term profitability.
Deal momentum captures the pipeline strength—how many new contracts are being won and how quickly they convert into billable revenue. Weak momentum often precedes lower future growth.
Investor Playbook: Bull vs. Bear Scenarios for Wipro
Bull Case: If Wipro’s pipeline materializes and the company secures at least two large‑scale digital transformation contracts, revenue could rebound to 3‑4% sequential growth. Coupled with its historically strong cash generation, a 12‑month target price of Rs 290 (Nomura’s view) becomes achievable, delivering a 16% upside from current levels.
Bear Case: Persistent weak deal bookings, margin compression from higher labor costs, and a continued flat‑growth trajectory could push the March‑quarter revenue to the lower bound of the guidance range. In that scenario, the stock may slip toward Rs 220 (Jefferies’ target), representing a further 12% downside.
Strategic positioning depends on your risk tolerance. Conservative investors might consider reducing exposure or hedging with sector ETFs, while aggressive traders could look for short‑term pull‑back buying opportunities near the Rs 220‑225 support zone.
Bottom Line: What This Means for Your Portfolio
Wipro’s guidance miss is not an isolated blip; it reflects a broader slowdown in Indian IT deal flow and heightened sensitivity to macro‑economic variables. The stock’s underperformance relative to the Nifty 50 underscores the need for disciplined portfolio management. Keep an eye on upcoming earnings guidance from peers, monitor Wipro’s contract wins, and adjust your exposure accordingly.