Wipro faces weak order bookings despite margin beat and AI growth investments

Investment View and Valuation

In its October 16, 2026 results update on Wipro Ltd, Nirmal Bang Institutional Equities Research retained its SELL rating and Rs 143 target price. The broker views the second-quarter FY27 margin performance positively, but considers the sharp deterioration in bookings and a weak organic growth bridge to be more important. The target price is based on 10 times blended earnings per share.

Nirmal Bang noted that third-quarter FY27 guidance is unchanged from the second-quarter range but includes a full quarter of Mindsprint and the Alpha Net tuck-in, implying minimal or potentially negative organic growth.

Q2 FY27 Financial Performance

Wipro reported IT services revenue of US$2.61 billion in Q2 FY27, flat quarter on quarter and up 0.6 per cent year on year in constant currency, within its guidance range. EBIT margin improved 50 basis points sequentially to 16.5 per cent, aided by operational improvements and rupee depreciation, partly offset by continued business investment.

Employee cost eased by 40 basis points sequentially. The margin improvement was supported by operational improvements and rupee depreciation, although continued business investment partly offset these benefits.

Bookings and Order Conversion

Bookings were the principal negative. Q2 FY27 total contract value was US$2.6 billion, down 22.9 per cent quarter on quarter in constant currency and 44.6 per cent year on year. Large-deal TCV was only US$674 million, down 58.6 per cent sequentially and 76.4 per cent year on year. Nirmal Bang described this as the weakest large-deal quarter in at least two years.

Management said two deals slipped to Q3 FY27 because of paperwork delays rather than deal losses and expects better TCV closure in Q3. The broker remained cautious because the same slippage explanation was offered in Q1 FY27 and conversion had not materialised. It also highlighted Wipro's already weak TCV-to-revenue conversion versus peers.

Q3 FY27 Outlook and Regional Trends

Management guided for Q3 FY27 IT services revenue growth of negative 1.5 per cent to positive 0.5 per cent quarter on quarter in constant currency. Earlier-won BFSI deals and a full quarter of Mindsprint are expected to partly offset weak Americas performance.

Americas 1 declined 2.1 per cent sequentially and 2.7 per cent year on year because of client-specific issues and healthcare softness. Health declined 3.8 per cent sequentially and 6.5 per cent year on year as US payers curtailed discretionary expenditure. Europe and APMEA were relatively stronger, while consumer and BFSI delivered sequential growth.

Margin Priorities and AI Investment

Management reiterated its aim to return EBIT margin to 17.0 to 17.5 per cent, without a timeline, while warning that investment in the AI-Native unit and client engagements would create near-term margin headwinds.

The AI-Native unit has more than 2,000 engineers and is building industry-specific small language models. Wipro is also investing in AI data centres, AI foundry services, physical AI, AI devices and design-to-manufacturing. Mindsprint has strengthened food and agriculture capabilities, while Harman DTS has improved engineering capabilities.

Estimates and Key Forecasts

Nirmal Bang raised FY27E, FY28E and FY29E revenue estimates by about 0.9 per cent to 1.3 per cent, but forecast modest US-dollar revenue growth across the three years. Its FY27E EBIT margin assumption remains below consensus.