Wipro has cautioned that its margins in the June quarter will be impacted by wage hikes, even as the company navigates a weak demand environment and guides for muted revenue growth.
Speaking during its earnings call, the company said that wage hikes, which came into effect from March 1, will have a full-quarter impact in first quarter of fiscal 2027, putting pressure on profitability. This comes after margins in Q4 were already affected by higher employee costs and integration expenses.
According to analysts at Jefferies, Wipro's EBIT margins stood at around 17.2%–17.3% in the March quarter, broadly flat sequentially but slightly below expectations. The brokerage noted that employee costs alone impacted margins by about 70 basis points quarter-on-quarter, driven by two additional months of the Harman DTS acquisition and one month of wage hikes. These pressures were partly offset by favourable currency movements, lower depreciation and amortisation, and provision reversals.
Analysts at Kotak Institutional Equities expected wage revision headwinds to persist in the last quarter, although they believed the impact could be partially cushioned by rupee depreciation.
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The margin pressure comes at a time when revenue visibility remains weak. Wipro has guided for IT services revenue in the range of $2,597 million to $2,651 million for first quarter of this fiscal, implying a -2% to 0% sequential growth in constant currency terms. Constant currency refers to a fixed exchange rate used to eliminate the impact of currency fluctuations on financial performance.
The company's IT services segment has already shown signs of strain, with financial year 2026 revenue declining 0.3% to $10,478.1 million, even as overall gross revenue rose 4% year-on-year to $9.9 billion.
Chief Financial Officer Aparna C Iyer indicated that the soft guidance is partly seasonal, noting that the first quarter is typically weaker. However, she also pointed to client-specific challenges in the Americas 2 region, which includes Canada and select US sectors such as banking and energy, as well as delays in ramp-up of large deals.
The Banking, Financial Services and Insurance (BFSI) segment, a key revenue driver, declined 1.3% sequentially in Q4, reflecting these ramp-up issues. Such bottlenecks, which arise when scaling up operations or executing large contracts, are expected to continue affecting near-term performance, according to CEO and MD Srini Pallia.
Wipro's cautious outlook comes amid broader weakness in the IT sector. Notably, Tata Consultancy Services also reported its first-ever annual decline in constant currency revenue in FY26, highlighting the challenging demand environment.
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