- Organic revenue grew a razor‑thin 0.6% QoQ – the weakest in the IT peer group.
- Guidance points to flat‑to‑negative growth in Q4, hinting at delayed deal ramps.
- Deal‑size (TCV) fell 9% YoY, far below the $2.06 bn quarterly average.
- ICICI cuts EPS forecasts modestly and keeps a HOLD rating with a 256‑rupee target.
- Sector‑wide AI optimism may be overstated; margins could be squeezed by higher D&A charges.
You ignored the fine print in Wipro’s earnings call. That could cost you.
Why Wipro's Soft Revenue Growth Mirrors Sector Slowdown
Wipro’s 0.6% organic revenue increase for Q3 FY26 is not an isolated blip. The Indian IT services landscape is grappling with a confluence of macro pressures: a slowdown in discretionary spending, tighter capex budgets in the US and Europe, and a modest dip in the number of billable days per employee. The result is a sector‑wide compression of top‑line growth rates, with many peers reporting sub‑2% expansions. When the headline numbers are that thin, the underlying order flow – the pipeline of large‑scale digital transformation contracts – becomes the decisive factor.
From a technical perspective, the “organic” qualifier strips out currency effects and acquisitions, leaving a pure view of core business momentum. A 0.6% rise after a series of 5‑7% YoY jumps signals a deceleration that can trigger a reassessment of valuation multiples, especially for a company that trades on future‑growth narratives.
How Competitors Tata and Infosys Are Positioning Amid AI Hype
Tata Consultancy Services (TCS) and Infosys have both doubled down on AI‑enabled services, but they are reporting a slightly more resilient top line. TCS posted a 3.2% QoQ organic growth, citing early wins in AI‑driven automation. Infosys, meanwhile, highlighted a 2.9% rise, driven by higher billable days and a robust North‑America backlog. Both firms are leveraging strategic acquisitions to boost their D&A (Depreciation & Amortisation) expense, yet they manage to keep margins stable by extracting higher pricing power from AI‑centric contracts.
Wipro’s lag suggests its AI‑led narrative may be more aspirational than operational. The company announced a $1 bn AI fund last year, but the current guidance shows that large‑deal ramp‑up is still lagging. Investors should watch the deal‑closure velocity metric – the rate at which signed contracts translate into revenue – to gauge whether Wipro can catch up with its peers.
Historical Parallel: Indian IT Firms' Revenue Dips and Recovery
India’s IT sector has weathered similar revenue compressions before. In FY2018‑19, the industry faced a 1.8% YoY slowdown as global clients trimmed budgets ahead of the US‑China trade tensions. The rebound came within 12‑18 months, driven by a wave of cloud migration projects and the emergence of AI‑assisted services.
The pattern is repeatable: a short‑term dip followed by a rapid upcycle once new technology adoption accelerates. However, the catalyst this time is AI, which has a longer adoption curve and higher implementation risk. The historical recovery was fuelled by legacy modernization; AI requires new skill sets, longer sales cycles, and more upfront investment.
Decoding the Numbers: What TCV and D&A Really Mean for Investors
TCV (Total Contract Value) is the aggregate value of all signed contracts, regardless of when revenue will be recognized. A 9% YoY decline to $871 mn indicates that Wipro’s pipeline is both smaller and potentially less premium than in prior quarters, where the average was $2.06 bn. This contraction puts pressure on future cash‑flow forecasts.
D&A (Depreciation & Amortisation) reflects the cost of integrating acquisitions and the amortisation of intangible assets such as software licences and goodwill. The latest guidance flags a higher D&A charge, which will erode EBIT margins unless offset by higher pricing or operational efficiencies.
Both metrics are red flags for valuation models that rely on stable or growing cash conversion cycles.
Investor Playbook: Bull vs. Bear Cases for Wipro
- Bull Case:
- AI‑centric deals finally materialise in Q2‑FY27, pushing revenue growth to 4‑5% YoY.
- Margin compression from D&A is mitigated by higher pricing on AI services.
- Share price re‑ratings as the P/E multiple expands back to 20x, delivering upside beyond the 256‑rupee target.
- Bear Case:
- Deal ramp‑up remains sluggish; Q4‑FY26 revenue slides into negative territory.
- D&A and integration costs continue to weigh on EBIT, compressing margins below 15%.
- Market sentiment shifts to peers, leading to a valuation discount and potential price drop to the 220‑rupee range.
Given the current data, the prudent stance is a cautious hold, with a watchful eye on AI‑deal conversion rates and margin trajectories. Adjust your allocation as the next earnings season reveals whether Wipro can transform its AI aspirations into tangible top‑line momentum.