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Wipro Shares Surge on Optimistic Demand Outlook

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Shares of Wipro (WIPR.NS) surged approximately 8% on Monday, positioning the company for its best day in nearly four years. This sharp rise followed a positive earnings report and an optimistic outlook for future demand, echoing trends seen in its larger IT peers.

Key Highlights:

  • Strong Q3 Performance: Wipro reported better-than-expected third-quarter profits, signaling a recovery in demand within the IT services sector.
  • Optimistic Outlook: The company forecasts a 1% sequential revenue growth for the current quarter, compared to no growth last quarter. Wipro’s CEO, Srinivas Pallia, attributed this to a gradual return of discretionary spending despite ongoing macroeconomic challenges.
  • Improved Forecast: Wipro’s guidance for the upcoming quarter reflects a brighter outlook, with analysts noting that deal bookings—especially small- to mid-sized deals—point to a revival in discretionary tech spending.
  • BFSI Sector Growth: Wipro’s banking, financial services, and insurance (BFSI) segment saw an 11% increase in revenue, indicating a resurgence in spending in this key area.
  • Analyst Optimism: Following the positive earnings, at least eight brokerages raised their rating on Wipro’s stock, and 16 increased their price targets. Analysts also highlighted the company’s impressive operating margin, which reached a three-year high of 17.5%, driven by efficient deal execution.
  • Sector-Wide Optimism: Wipro’s outlook mirrors that of its larger peers, such as TCS, Infosys, and HCLTech, signaling a broader recovery within the $254 billion Indian IT services sector, which had struggled in recent quarters due to economic uncertainty and inflation.

Infosys Files Counterclaim Against Cognizant for Anti-Competitive Practices

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Infosys, India’s second-largest software company, has filed a counterclaim against rival Cognizant in a Texas federal court, accusing the U.S.-based tech firm of engaging in anti-competitive practices and poaching key executives. The Bengaluru-based company alleges that Cognizant implemented anti-competitive contract clauses that prevented clients from awarding IT services work to competitors, as well as refusing training on its software.

In addition, Infosys claims that Cognizant engaged in targeted recruitment of senior executives, including hiring S Ravi Kumar as its CEO in 2023, which allegedly delayed the development of Infosys’ competing software, Infosys Helix. Infosys argues that these actions were aimed at hindering its ability to compete effectively in the software market.

Cognizant responded to the accusations by stating it would take decisive action to address any allegations. The company emphasized its commitment to promoting competition but insisted that competitors should not use Cognizant’s intellectual property to unfairly compete, which it alleges Infosys has done.

Infosys has not yet responded publicly to a request for comment on the counterclaim. This legal dispute follows a separate lawsuit filed by Cognizant’s subsidiary, TriZetto, in August 2023. TriZetto, a healthcare software provider, accused Infosys of stealing trade secrets related to its healthcare insurance software, Facets, and QNXT, which are used by insurance companies to automate administrative tasks.

TriZetto’s lawsuit claimed that Infosys misused its software to create “Test Cases for Facets,” improperly repackaging TriZetto’s data into an Infosys product. Infosys is seeking triple damages as well as attorney fees and other related costs, though the specific amount of damages has not been disclosed.

The legal battle is ongoing, with the case being heard in the U.S. District Court for the Northern District of Texas (Case No. 3:24-cv-02158-X).

 

HCLTech Shares Plunge 10% After Missing Quarterly Revenue Estimates

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Shares of HCLTech (HCLT.NS) dropped nearly 10% on Tuesday, marking their worst session since September 2015. The decline came after India’s third-largest software services provider missed revenue estimates for its third quarter and adjusted only the lower end of its full-year sales guidance.

Revenue Miss and Analyst Reactions

HCLTech reported a 5.1% year-on-year rise in consolidated revenue to 298.9 billion rupees ($3.45 billion), falling short of analysts’ expectations of 300.68 billion rupees. The miss was attributed to underperformance in the company’s software business.

Following the earnings release, at least 11 brokerages downgraded their ratings on HCLTech, and four brokerages reduced their price targets, according to LSEG data.

Guidance and Market Sentiment

Despite the disappointing results, HCLTech CEO C Vijayakumar projected an improving demand environment in 2025, echoing optimism expressed by larger competitor Tata Consultancy Services (TCS). The company revised its fiscal year 2025 revenue growth forecast to 4.5%-5% from the earlier 3.5%-5%, factoring in acquisitions.

However, analysts remain cautious. Goldman Sachs noted that the midpoint of HCLTech’s revised revenue guidance fell slightly below expectations, citing weaker growth in the software segment and the gradual ramp-up of discretionary projects. Sanjeev Hota, vice president at Mirae Asset Sharekhan, commented that the lack of an increase in the upper range of revenue guidance further dampened investor sentiment.

Market Performance

HCLTech’s shares were the worst performers on India’s blue-chip Nifty 50 index (.NSEI), which rose 0.5% on Tuesday after a 1.5% drop in the previous session. Despite Tuesday’s plunge, HCLTech had outperformed its peers in 2024, posting a 31% gain compared to a 22% rise in the Nifty IT index (.NIFTYIT).

In contrast, competitors Tata Consultancy Services and Infosys recorded gains of 8.5% and 22.5%, respectively, over the same period. On Tuesday, TCS and Infosys shares dipped by 0.31% and 0.61%, respectively.