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Weak start to another challenging year

Quick Pointers

* Organic weakness leads to muted growth in Q4

* Rev. guidance of -2% to 0% QoQ CC for Q1FY27

Wipro reported Q4 revenue growth of +0.2% QoQ CC, below our and consensus estimates of +0.8% QoQ CC. Harman DTS integration contributed ~1.5% QoQ in Q4 (our estimates). The weakness was driven by multiple headwinds in the organic business in America region, including slower deal ramp-ups & client-specific issues in BFSI, and a sharp decline in the Healthcare segment due to seasonality and policy changes. FY26 deal wins at USD 16.4b were strong YoY compared to FY25, with a healthy mix of vendor consolidation, strategic engagements, and multiple mega deals. However, continued client-specific challenges (expected to persist through Q1) and slower deal conversion are likely to weigh on near-term organic growth. Weak Q1 revenue guidance of -2% to 0% QoQ CC includes ~1.5 months contribution from Olam Group and Alpha Net acquisition. Considering the slower TCV-to-revenue conversion and softness in Q1, we anticipate FY27E to be another challenging year. Hence, we revise our revenue growth estimates downward to 1.5% and 2.5% YoY CC for FY27E and FY28E, respectively (from 3.6% and 4.2% earlier). On margins, Q1 will face headwinds from wage hikes (two-month incremental impact), acquisition integration costs, and large deal ramp-ups. However, we largely maintain our EBIT margin estimates due to solid cost control and currency support. We assign a PE of 14x (earlier 15x) to FY28E EPS to arrive a TP of INR 200 (earlier INR 230) and downgrade to HOLD (BUY earlier).

Revenue: IT Services revenue was USD 2.65 bn, up 0.2% QoQ in CC, below our and consensus est. of 0.8% QoQ CC. Growth was muted despite full Harman integration due to weakness in BFSI & Healthcare segments particularly in America region. Segment wise Health & BFSI declined by 4.4% & 1.3% QoQ CC respectively while Tech & Consumer grew by 5.3% & 1.7% QoQ CC. Geography wise Americas 2 declined by 2.6% QoQ CC while America 1, Europe & APMEA grew by 0.3%, 2% & 3.1% QoQ. For FY26, Wipro reported IT Services revenue of USD 10.5 bn, down 1.6% YoY CC. 

Operating Margin: IT Services EBIT margin declined by 30 bps QoQ to 17.3%, in line of our estimate and above consensus est. of 17%. Margin declined due to the headwinds of wage hike (1 month impact) and full integration of low margin Harman business. For FY26, Wipro reported IT Services EBIT margin of 17.2%, up 20 bps.

Deal Wins: Deal wins were again soft, with TCV of USD 3.46 bn compared to 3.34 bn in Q3. Large deal wins came at USD 1.44 bn including 14 mega deals. For FY26 the company won TCV of USD 16.45 bn, up 14.9% with BTB of 1.6x.

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