For Wipro, tariff-led macro uncertainty makes things messy

Wipro Ltd’s turnaround plan could be jeopardised by any potential adverse impact in the global economic scenario, which is marred by trade tariffs. The objective of the IT company’s revamped strategy was to boost its revenue trajectory that has been lagging larger peers lately. So, in the past year, Wipro has taken several corrective measures under the leadership of new CEO Srinivas Pallia.

But even before trade tariffs were announced, concerns around clients’ discretionary technology spending had not eased for the IT sector. Now, the demand scenario has become tougher to predict. Wipro is feared to feel more heat than other tier-1 IT companies because of a higher exposure to discretionary services after consulting acquisitions in BFSI of Capco and in retail of Rizing. The desired outcome of the ongoing turnaround process may now get further delayed.

For cues on Wipro’s revenue growth pangs, look no further than latest management commentary, which follows muted March quarter (Q4FY25) results. Client spends deteriorated toward the end of Q4, and June quarter (Q1FY26) could see further impact, the management said. Tariff-led macro uncertainty is weighing on the demand in verticals such as consumer and manufacturing, resulting in a pause of certain large transformation projects, added the management.

No wonder then Wipro’s Q1FY26 sequential constant currency revenue guidance of - 3.5% to -1.5% is below consensus estimate of -1% to +1 %. “Part of Wipro’s weak guidance for Q1FY26 can be attributed to slippages in Europe, which, in our view, is company-specific,” said the Kotak Institutional Equities report dated 16 April.

Kotak cautions that a sharp and consistent decline in revenues from Europe is worrying. Wipro has been losing share in Europe due to leadership exits. While it has taken corrective measures to remedy the situation in Europe, it still has a long way to go.

Among other geographies, Americas 1 and APMEA saw marginal revenue growth in Q4FY25, while Americas 2 declined.

Americas 1 covers Latin America and US sectors like healthcare, consumer goods, retail, transportation, tech, and media. Americas 2 includes Canada and US sectors such as BFSI, manufacturing, hi-tech, energy, and utilities. APMEA spans Australia, New Zealand, India, the Middle East, Southeast Asia, Japan, and Africa

All its verticals (healthcare, consumer, tech & communications and BFSI) except for energy, manufacturing and resources saw revenues decline in Q4FY25. These factors culminated in Wipro reporting IT services sequential revenue drop of 0.8%, which was towards the lower end of the guidance and also below the consensus estimate.

Earnings before interest and tax (Ebit) margin at 17.5% was flat sequentially, but slightly ahead of consensus estimate of 17.4%. But that’s hardly a consolation. The Wipro management intends to keep margins close to current levels but is facing headwinds from a weak growth environment and large deal implementation cost in H1FY26.

The total contract value (TCV) of deal wins for Wipro stood at $3.95 billion in Q4FY25, including large deal wins worth $1.76 billion–both the readings rose sequentially and year-on-year. However, large transformation deals might see execution delays in the near-to-medium term.

Also Read: Will Pallia’s game plan for Wipro secure Rishad Premji’s legacy?

Investors jittery

A disappointing exit to FY25, with constant currency revenue down 2.3% year-on-year, and a weak start to FY26 are making the Street edgy. Investors are wondering if Wipro is headed for a third straight year of revenue decline.

For now, earnings downgrades pour. Nuvama Research cautions that Wipro’s turnaround thesis is derailing, and it has trimmed FY26 and FY27 earnings per share estimates by 3.0% and 3.7%, respectively, on lower growth expectations.

The Wipro stock fell 6% on Thursday. However, it has outperformed the Nifty IT index with 5.14% returns in the past year. The shares trade at FY26 price-to-earnings of 18 times, showed Bloomberg data. This is a discount to its large-cap peers and would sustain for now.

Also Read: A cloud of uncertainty hangs over the Big Five of India's IT industry