Analysts warn of a third year of revenue decline, stock downgraded as Wipro slides on weak Q1 forecast

Shares of Wipro Ltd dropped as much as 6.3% on Thursday after the IT services firm issued a disappointing revenue forecast for the June quarter, raising concerns of a third consecutive year of decline amid persistent global tech spending cuts.

India’s fourth-largest IT exporter said on Wednesday it expects revenue in the April-June period to fall between 1.5% and 3.5% sequentially, with new Chief Executive Srini Pallia warning that "uncertainties have dramatically increased" going into the new fiscal year.

The guidance, analysts said, marks a worrisome start for fiscal 2026 and signals continued headwinds despite a leadership change.

Pallia, who took over in April 2024 following the abrupt exit of Thierry Delaporte, inherits a company grappling with a string of weak quarters, stalled large deals, talent attrition, and market share erosion.

Wipro shares were down 5% as of 11:51 am IST on Thursday, extending their year-to-date decline to 22.4%.

While that is marginally better than the broader Nifty IT index’s 24.8% fall, it underscores growing investor scepticism about the firm’s prospects.

Analysts warn of a third year of revenue contraction

Brokerages were quick to flag that Wipro’s first-quarter guidance could derail any early hopes of a recovery.

“The first quarter guidance sets the stage for another challenging year following two years of revenue decline,” analysts at Phillip Capital said in a note.

Several firms—including Nomura, Nuvama, Emkay, and ICICI Securities—trimmed their FY26 and FY27 earnings estimates, citing elevated macroeconomic uncertainty, slowing transformation project spends, and the lingering impact of geopolitical tensions and tariffs, particularly in key markets like the United States.

Nomura cut its FY26 earnings per share (EPS) estimates by 2–4% and revised the target price to ₹280 from ₹300.

It maintained a Buy rating, citing improved shareholder return policies, but warned that its earnings projections remain 8–9% below Bloomberg consensus.

Nuvama downgraded the stock to Hold and reduced its price target to ₹260, stating that Wipro’s weak first-quarter guidance jeopardizes the turnaround thesis.

The brokerage lowered its FY26/27 EPS estimates by up to 3.7%.

Muted forecast triggers widespread downgrades

At least nine out of the 39 analysts covering the stock have downgraded their ratings, while 20 have cut their price targets, according to LSEG data.

The average analyst rating remains at "Hold", but the median target price has declined by nearly 14% to ₹250 over the past month.

Emkay Global said the company’s Q1 outlook factors in both potential demand recovery and further weakness.

It maintained a "Reduce" rating with a ₹260 target, highlighting low near-term visibility despite a strong deal pipeline.

ICICI Securities termed the March quarter’s performance “abysmal,” citing weak revenues and macro concerns—especially in discretionary-heavy sectors like auto and manufacturing.

The firm said the lone bright spot was the total contract value (TCV) from two large deal wins, but added that Wipro’s key challenge lies in translating orders into revenues and stabilising its European operations.

Brokerages remain cautious as growth triggers remain elusive

Motilal Oswal Financial Services (MOFSL) cut its FY26/FY27 EPS estimates by around 4%, anticipating a 1.9% YoY revenue decline in constant currency terms.

The brokerage retained its Sell rating with a target price of ₹215, implying a valuation of 17 times FY27 earnings.

Though some brokerages note positives such as improved capital allocation policies and a projected FY27 dividend yield of 4%, consensus suggests that the near-term outlook remains grim with little to spark a re-rating in the stock.