In its latest report, Emkay Global Financial Services has maintained a ‘Reduce’ rating on Wipro Ltd., citing a soft Q4 performance and underwhelming guidance for Q1 FY26. The brokerage has set a 12-month target price of Rs 260, slightly above the current market price of Rs 248, suggesting minimal upside potential. While Wipro has maintained margin resilience, revenue miss, macro headwinds, and subdued demand outlook continue to cast a shadow on near-term prospects. With a book-to-bill ratio of 1.5x and deal intake at USD 4 billion, Wipro’s long-term fundamentals remain intact, but execution remains key amid global uncertainty.

Revenue Miss and Conservative Guidance Cloud Investor Sentiment

Wipro’s Q4 FY25 performance underwhelmed the Street as its IT services revenue dipped 0.8% quarter-on-quarter in constant currency (CC) terms, falling near the lower end of management’s guidance. The topline came in at USD 2.6 billion, marginally below estimates.

The company has guided for a QoQ revenue decline of 3.5% to 1.5% in Q1 FY26—a range that disappointed analysts and signals muted client spending amid macroeconomic and tariff-related uncertainty, particularly in the U.S. and Europe. This cautious client behavior was evident in delayed project ramp-ups, program pauses, and some ramp-downs.

Margins Hold Steady Despite Topline Pressure

Wipro’s IT Services EBIT margin stood flat at 17.5% in Q4, while the consolidated EBIT margin softened marginally by 10bps to 17.4%. The company’s ability to maintain profitability despite revenue headwinds was notable. Key margin drivers included operating discipline and cost optimization.

Emkay expects FY25 EBIT to grow 11.1% YoY to Rs 151,271 million, driven by margin preservation initiatives, but notes risks stemming from continued softness in Europe and selective client budget pullbacks.

Deal Wins Remain a Silver Lining

A highlight in Wipro’s Q4 scorecard was its strong order intake. The company secured USD 4 billion in total TCV, including USD 1.8 billion in large deals. This translates to a healthy book-to-bill ratio of 1.5x, reflecting sustained client trust despite cyclical challenges.

The Capco unit continued to perform robustly, with QoQ growth of 6.5% and 11.5% YoY. This segment, focused on consulting-led transformation, is expected to support Wipro’s long-term repositioning strategy.

Geographical and Sectoral Trends Highlight Pockets of Weakness

Wipro saw a mixed performance across geographies and verticals:

• Americas 1 and APMEA regions posted modest sequential revenue growth (0.2% and 1.0% CC QoQ).
• Americas 2 and Europe saw declines of 1.0% and 2.5% QoQ respectively, weighed by discretionary IT spending cuts.
• Sectors such as Consumer, BFSI, Tech, and Communications experienced contraction, while Energy & Manufacturing remained resilient.

The company’s headcount stood at 233,346, up 0.3% QoQ, while attrition moderated to 15%, down from 15.3% in Q3, suggesting improved workforce stability.

Revised Estimates Reflect Near-Term Pessimism

In response to Q4 results and weak Q1 guidance, Emkay has reduced FY26–FY27 EPS estimates by 0.7% to 1.2%. FY26 consolidated revenue is now forecast at Rs 900,728 million, down 3.5% from earlier projections.

The brokerage notes that while cost control may protect margins, revenue volatility driven by client conservatism remains the core concern.

Valuations, Dividend Yield, and Capital Return

Wipro’s stock is currently trading at 19.7x FY25E P/E, and Emkay values the stock at 18x FY27E EPS, implying a fair value of Rs 260. The dividend payout ratio has surged to 47.8% in FY25, with a proposed dividend of Rs 6 per share.

The balance sheet remains strong with zero net debt and cash reserves exceeding Rs 561 billion. Capital allocation toward shareholder returns has been healthy, with Rs 62,750 million paid in dividends in FY25.

Investor Takeaway: Medium-Term Strategy is Key

While near-term revenue growth is subdued, Wipro’s focus on AI-led transformation, client-centric execution, and large deal wins provide a strategic cushion. Execution on its strong pipeline will determine re-rating potential.

Target Price: Rs 260
Current Market Price: Rs 248
Emkay Recommendation: REDUCE
52-week Range: Rs 208 – Rs 325

Conclusion: Caution Advised Amid Cloudy Visibility

Despite resilient margins and strong deal wins, Wipro’s weak revenue outlook and cautious client behavior limit near-term upside. Emkay’s reduced earnings forecast and the reiterated REDUCE rating reflect tempered optimism. Investors are advised to stay cautious and watch for signs of demand revival, especially from Europe and Consumer verticals. The stock may offer long-term potential but lacks immediate catalysts to drive rerating.