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Growth Momentum Remains Soft, Deal Conversion Key to Recovery:

Wipro’s Q2FY27 performance remained subdued, with IT services’ revenue declining 1.2% QoQ in CC, while management guided for Q3FY27 growth of -1.5% to +0.5% QoQ in CC, reflecting seasonal furloughs and fewer working days. Delayed deal signing is expected to provide a revenue tailwind into Q3 & Q4, while the demand environment remains largely unchanged. Clients are increasingly prioritising AI-led productivity and efficiency, creating opportunities for higher-value transformation. Wipro is scaling up investments across AI data centres, AI foundry services, physical AI, AI devices and design-to-manufacturing, broadening its position across the AI value chain.

We see improving deal conversion and monetisation of AI investments as key catalysts for a gradual growth recovery, though execution and margin delivery remain critical given near-term investment intensity. At 12x average FY28 & 29 EPS, we arrive at a TP of INR 160 and assign ‘REDUCE’, implying limited valuation re-rating until growth momentum improves

Margin Improves, but Weak Bookings and Muted Guidance Weigh Down

* WPRO reported Q2FY27 IT services revenues at USD 2.61 Bn, down 0.1% QoQ and up by 0.3% YoY, (vs CIE estimate of USD 2.59 Bn), while, in CC terms, growth stood flat QoQ and 0.6% YoY

* EBIT stood at INR 40.6 Bn, up 3.7% QoQ and 7.4% YoY (vs CIE estimate of INR 41.7 Bn). Operating (EBIT) margin came in at 16.4% for Q2FY27, up 48 bps QoQ but down 20 bps YoY (vs *PAT for the quarter came in at INR 32.0 Bn, down by 4.5% QoQ and up 1.4% YoY

Revenue Growth Remains Subdued, while Deal Momentum Provides Q4 Visibility:

Wipro reported a mixed Q2FY27, with IT services revenue flat QoQ and growing 0.6% YoY in CC, as Consumer (+2.6% QoQ), BFSI (+1.0%) and ENR (+1.0%) growth was offset by weakness in Technology & Communications (- 2.6%) and Healthcare (-3.8%). TCV remained healthy at USD 2.6 Bn, with nine large deals, although two Q2 deals slipped due to paperwork and are expected to close in Q3, providing a potential revenue tailwind into Q4. BFSI momentum is improving, supported by a mega-deal ramp-up and demand for AI, data modernisation and cloud transformation. Q3 guidance of -1.5% to +0.5% QoQ CC reflects seasonal furloughs and lower working days. We expect deal conversion and BFSI recovery to support growth, although near-term momentum remains muted.

Margin Recovery Under way, though Investment Intensity Remains a Drag:

IT Services EBIT margin improved 50 bps QoQ to 16.5%, supported by operational improvement and favourable currency, partly offset by continued investments and talent. Despite the sequential improvement, margin remained 20 bps lower YoY and below the 17.0–17.5% management target range, with no timeline provided for recovery. The management highlighted the need to balance profitability with investments in AI capabilities and growth opportunities. We expect a gradual margin expansion through FY27E, supported by productivity gains, while AI-led investments and pricing pressure may constrain operating leverage.

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