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Wipro Lags Rivals as Deal Wins Slide and Q4 Outlook Disappoints

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Wipro, India’s fourth-largest IT services provider, delivered a weaker-than-expected outlook for the current quarter on Friday after reporting its lowest deal bookings in six quarters, underscoring its struggle to keep pace with larger rivals amid uneven demand.

The Bengaluru-based firm said it expects revenue growth in the fourth quarter to range from flat to 2% sequentially, including contributions from acquisitions. That fell short of market expectations, with Kotak Institutional Equities forecasting growth of 1.5% to 3.5%. Following the announcement, Wipro’s U.S.-listed shares dropped as much as 7.2%.

The subdued guidance contrasted with stronger performances from bigger competitors such as Tata Consultancy Services and Infosys, both of which reported steadier deal wins and better-than-expected revenue in the seasonally weak third quarter.

“Wipro’s revenue growth was broadly in line with estimates, but deal wins were slightly below average. More importantly, its guidance is below street expectations,” said Anmol Garg, an analyst at DAM Capital.

Wipro reported total deal bookings of $3.34 billion for the December quarter, its weakest showing in six quarters, down from $4.69 billion in the previous quarter and $3.5 billion a year earlier. Consolidated revenue rose 5.54% year-on-year to 235.56 billion rupees ($2.59 billion), beating analysts’ average estimate of 233.91 billion rupees, according to LSEG data.

Net profit, however, fell 7% to 31.19 billion rupees, missing market expectations. The quarter included a one-time charge of 3 billion rupees linked to India’s new labour codes, adding pressure to earnings.

Analysts said margins remain under strain as Wipro continues to invest heavily in AI-driven delivery models while absorbing higher compliance costs and rising wages. “Wipro is prioritising long-term capability building, even as demand remains uneven,” said Gaurav Parab, an analyst at NelsonHall.

SECTOR SIGNALS TURN MIXED
The broader outlook for India’s $283 billion IT sector is showing tentative improvement. Smaller rival Tech Mahindra beat third-quarter revenue estimates on Friday, supported by stronger demand from communications clients.

After cutting back discretionary spending amid tariff-related uncertainty, clients are gradually increasing investment in AI-led projects. Wipro Chief Executive Srini Pallia said there is “a very clear shift towards AI-led transformation,” though the benefits have yet to fully translate into stronger deal momentum for the company.

Tech Mahindra struck a more optimistic tone. Chief Executive Mohit Joshi said the company expects to outperform peers in revenue growth next fiscal year, citing stabilising client spending in the United States and signs that Europe could move from stability into a growth phase.

For now, Wipro’s softer deal pipeline and cautious near-term guidance highlight the uneven recovery across India’s IT services landscape, even as AI-driven demand begins to re-emerge.

India’s IT Sector Faces Uncertainty as U.S. Considers Outsourcing Tax

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India’s $283 billion IT industry is bracing for turbulence after U.S. lawmakers introduced a proposal to impose a 25% tax on outsourcing, a move that could reshape decades of cross-border technology contracts. Analysts and lawyers warn the bill could delay deals, trigger renegotiations, and heighten regulatory risks for a sector that makes up over 7% of India’s GDP.

The Proposal

Republican Senator Bernie Moreno introduced the HIRE Act, which would:

  • Impose a 25% tax on U.S. companies that outsource IT services abroad.

  • Bar companies from claiming outsourcing payments as tax-deductible expenses.

  • Funnel revenue into U.S. workforce development.

In some scenarios, combined federal, state, and local taxes could raise outsourcing costs to as much as 60%, according to EY India’s Jignesh Thakkar.

Why It Matters

India’s IT giants — including TCS, Infosys, HCLTech, Tech Mahindra, Wipro, and LTIMindtree — count Apple, Citigroup, FedEx, Cisco, and Home Depot among their major U.S. clients. Outsourcing has long been criticized in the U.S. for shifting jobs overseas, but it remains vital to companies facing domestic labor shortages.

The bill comes at a difficult time for Indian IT firms already struggling with weak revenue growth as inflation, tariffs, and deferred tech spending weigh on their U.S. business.

Industry Reaction

Analysts expect a wave of lobbying and legal challenges if the bill advances. “A bill like this would probably face a lot of backlash from U.S. companies that rely heavily on outsourcing,” said Sophie Alcorn, CEO of Alcorn Immigration Law.

Others anticipate dilution: “More likely is a narrowed or delayed version of the bill,” said Phil Fersht of HFS Research.

Still, the uncertainty is already affecting contracts. “When political noise turns into regulatory risk, clients quickly insert contingencies, reopen pricing and demand delivery flexibility,” said Saurabh Gupta of HFS Research, warning that signing and renewal cycles will slow.

Global Capability Centers at Risk

The proposed tax could also impact U.S. firms’ global capability centers (GCCs) in India, which have evolved from low-cost back offices into innovation hubs for R&D, finance, and operations. “It will be hard to pull back from existing work, but new set-ups and expansion may get impacted,” said Yugal Joshi of Everest Group.

Outlook

Experts note the U.S. still lacks sufficient skilled tech labor, meaning outsourcing remains a structural necessity. As Bharath Reddy of CAM put it: “The lack of availability of appropriate human capital in the U.S. will continue as a problem — one that can be addressed in the near future only through outsourcing.”

Tech Mahindra Focuses on Expanding BFSI Segment to Close Gap with Larger Rivals

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Tech Mahindra, India’s fifth-largest software services exporter, is intensifying its efforts in the banking, financial services, and insurance (BFSI) sector to bridge the revenue gap with its larger competitors. CEO Mohit Joshi, who took charge in December 2023 after two decades at Infosys, aims to increase the contribution of BFSI to Tech Mahindra’s total revenue from 16% to 25% by March 2027.

Focus on BFSI Expansion

Joshi acknowledges that while the company has historically relied on telecom clients for revenue, the BFSI sector represents a more lucrative and growing opportunity. India’s $254 billion IT sector sees some peers generate as much as a third of their revenue from BFSI, and Joshi intends to ensure Tech Mahindra captures a larger share of this market. “We still have a lot of room to catch up,” he noted.

Targeting Core Banking and Insurance Services

Tech Mahindra will focus on key segments within BFSI, including core banking, payments, asset and wealth management, custodian services, and insurance. These areas are among the largest technology spenders, with large banks spending over $10 billion annually on tech services, making it a crucial area of growth for Tech Mahindra. Joshi’s leadership has already strengthened the company’s BFSI division to tap into these opportunities.

Role of Generative AI in BFSI

Joshi views generative artificial intelligence (GenAI) as an enabler rather than a threat to the tech services sector. He believes that AI will increase the demand for technology services, especially in sectors like BFSI, rather than diminishing the need for developers. “GenAI is the best spokesperson for why we need more money to be spent on technology,” Joshi said, adding that the demand for developers will continue to grow due to the increased complexity of tasks.

Human Element in Customer Service

While some fear AI could replace human roles in customer service, Joshi remains skeptical about a widespread shift to AI-driven contact centers. He emphasized that for critical issues, customers will still prefer human interaction over AI solutions.