Wipro margin beat offset by weak deal wins and muted growth outlook

Investment View and Valuation

Prabhudas Lilladher’s October 16, 2026 report on Wipro retains a HOLD rating and raises the target price to Rs 166 from Rs 154. The broker considers Q2 FY27 operating performance better than expected, but believes growth remains elusive because bookings weakened sharply and discretionary IT spending remains under pressure.

The target price is based on an 11 times price-to-earnings multiple applied to September 2028 estimated earnings per share.

Q2 FY27 Financial Performance

Wipro’s Q2 FY27 IT Services revenue was USD 2.61 billion, down 0.1 per cent quarter-on-quarter in constant currency. This was ahead of Prabhudas Lilladher’s expectation of a 0.5 per cent decline and the consensus expectation of a 0.7 per cent decline. Consolidated revenue was Rs 24,752.7 crore, up 1.1 per cent quarter-on-quarter and 9.1 per cent year-on-year.

The improvement in EBIT margin reflected operational improvements and rupee depreciation, partly offset by continued business investments. Adjusted profit after tax was lower than the broker’s estimate mainly because of lower other income.

Uneven Growth Across Verticals and Regions

Q2 FY27 growth was uneven across verticals. In constant currency terms, Consumer grew 2.6 per cent quarter-on-quarter, BFSI grew 1.0 per cent and Energy, Manufacturing and Resources grew 1.1 per cent. Technology and Communications declined 2.6 per cent, while Health declined 3.8 per cent.

By geography, Americas 1 declined 2.1 per cent, while Americas 2, Europe and APMEA grew 0.9 per cent, 0.6 per cent and 3.1 per cent, respectively. Management attributed the weakness in healthcare to policy changes and margin pressure at large US payers, which have reduced discretionary spending while prioritising AI automation.

Bookings and Near-Term Growth Outlook

Bookings were the central concern. Total contract value declined 22.9 per cent quarter-on-quarter in constant currency to USD 2.6 billion, the lowest level in the report’s history. The nine large deals had a total contract value of USD 674 million, down 58.6 per cent.

Management said the closure of two deals was delayed into Q3 FY27 and expects these deals to support potential revenue upside in Q4 FY27. It remains optimistic on Q3 deal closures because the pipeline is robust. However, Q3 FY27 revenue guidance of minus 1.5 per cent to plus 0.5 per cent quarter-on-quarter in constant currency remains muted, partly because of seasonal furloughs.

Management Priorities and Growth Opportunities

Management sees AI-led transformation, legacy modernisation and agentic AI as growth opportunities. It also reiterated that the following areas can improve margins:

• Automation and AI-led productivity
• Operational efficiencies
• Higher bench utilisation
• Pyramid restructuring
• Greater use of agents across projects

Wipro continues to invest in AI-native businesses. Prabhudas Lilladher notes that weakness in discretionary demand continues to weigh on traditional IT spending.

Estimates and Key Risks

Following the Q2 FY27 outcome, Prabhudas Lilladher improved its FY27E IT Services revenue growth estimate to a 0.4 per cent year-on-year constant-currency decline from a 0.7 per cent decline previously. It retained FY28E and FY29E constant-currency growth estimates of 0.4 per cent and 0.9 per cent, respectively.

The broker retained EBIT margin estimates of 16.5 per cent for FY27E, 16.7 per cent for FY28E and 16.8 per cent for FY29E, while raising FY28E and FY29E earnings per share estimates by 5.1 per cent and 5.6 per cent, respectively.

Key thesis risks include continued weak discretionary spending, healthcare-sector weakness, subdued near-term revenue guidance and failure of delayed deal closures to convert as expected.