Wipro's Mixed Q3: Profit Falls 7% But Margins Hold Steady

Introduction to Wipro's Q3 Performance

Wipro Ltd. announced its financial results for the third quarter of fiscal year 2026, revealing a mixed performance that reflects the broader challenges in the global IT services industry. The company reported a 7% year-over-year (YoY) decline in consolidated net profit, which stood at Rs 3,119 crore. Despite the dip in profitability, Wipro managed a 6% rise in revenue and an improvement in operating margins, signaling effective cost management in a tough macroeconomic environment. The board also declared an interim dividend of Rs 6 per share, providing some return to shareholders amidst market uncertainty.

Financial Metrics Under the Microscope

For the quarter ending in December 2025, Wipro's operating margin improved to 17.6%, a bright spot in its earnings report and one of its best in recent years. This was achieved despite pressures from furloughs and integration costs. However, the company's deal pipeline showed signs of softness. Total bookings for Q3 came in at $1.34 billion, marking a decrease of 5.7% compared to the same period last year. This decline in new business acquisition points to continued caution in discretionary tech spending among clients, particularly in the U.S. market.

Management Commentary and Strategic Direction

CEO Srini Pallia emphasized the company's strategic focus on Artificial Intelligence as a key driver for future growth. He highlighted that AI is playing an increasingly important role in client wins and innovation, positioning Wipro to lead in a market where AI-driven transformation is becoming critical. The company has launched 'Wipro Intelligence,' a unified suite of AI-powered platforms and solutions designed to help clients leverage data and AI effectively. Management remains focused on navigating the current environment by remaining resilient and adapting to global shifts.

Guidance and Near-Term Outlook

Wipro has provided a cautious outlook for the upcoming quarter. The company guided for its IT Services revenue to grow between 0% and 2% sequentially in constant currency terms. This modest forecast suggests that near-term visibility remains limited and that a significant rebound in demand is not expected immediately. The guidance will be a key focal point for investors and analysts, who are closely monitoring for signs of a sustained recovery in deal momentum and revenue execution.

A Look at Recent Performance Trends

The softness in Q3 bookings contrasts with a stronger performance in the preceding quarter. In Q2 FY26, Wipro had reported robust large deal bookings of $1.9 billion, a 90.5% YoY increase, with total deal bookings reaching $1.7 billion. The company's revenue in Q2 had also slightly surpassed guidance. This comparison highlights the volatility in the demand environment, where large deals can be sporadic and do not always translate into immediate revenue growth.

Market Reaction and Analyst Views

Following the Q3 announcement, Wipro's shares fell 3.03% in premarket trading, reflecting investor concerns over the weak bookings and muted guidance. Brokerages have maintained a mixed to cautious stance on the stock. Citi recommended a 'sell' rating, while Jefferies noted that the stock's risk-reward profile was unattractive given projections for low earnings growth. Other analysts have pointed to a persistent gap between strong deal announcements in previous quarters and actual revenue conversion, leading to downgrades and a 'wait-and-see' approach.

Navigating Broader Industry Headwinds

Wipro's performance is unfolding within a challenging context for the entire Indian IT sector. Companies are grappling with weak demand from the U.S., seasonal furloughs, and pressure on client tech budgets. While the depreciation of the rupee against the dollar offers some cushion for export-oriented firms, the fundamental issue of slowing demand persists. However, the industry is banking on the long-term potential of AI, cloud, and data analytics to reignite growth. Positive results from global peers like Accenture have provided some optimism, but a broad-based recovery is expected to be gradual, potentially gaining momentum through 2026.

Conclusion

Wipro's Q3 results paint a picture of a company managing costs effectively while navigating a difficult demand landscape. The improvement in operating margins is a significant achievement, but the decline in net profit and soft deal bookings underscore the prevailing headwinds. The company's strategic pivot towards AI is crucial for its long-term competitiveness. For now, investors will be closely watching for a stabilization in deal wins and a clearer path to sustainable revenue growth in the coming quarters.