Wipro's aggressive push into artificial intelligence is creating new growth opportunities, but the transition could come with near-term pain, according to Jefferies. The brokerage maintained its Underperform rating on the IT services major with a target price of Rs 180, following meetings with the Wipro management.
Jefferies said Wipro sees AI as a significant medium-term opportunity, particularly through what it calls “Build” and “Reimagine” engagements, where enterprises redesign applications, workflows and business processes using AI. Management believes these opportunities could expand the company's addressable market beyond traditional IT services.
However, the brokerage cautioned that the company's legacy business may continue to weigh on performance over the next few quarters.
According to management, compression in traditional services revenue is likely to persist as clients increasingly seek productivity gains from AI deployments. Wipro is passing some of those productivity benefits back to customers through lower pricing, creating a short-term drag on reported revenue growth even as underlying demand remains healthy.
Impact of Investments
Wipro has invested heavily in proprietary AI platforms such as Wings and Vega, which are now integrated across a majority of client engagements. These platforms reportedly support hundreds of AI agents and are increasingly being used in sectors such as banking, financial services and logistics.
As part of this transition, Wipro is moving away from the traditional time-and-material (T&M) billing model toward fixed-price, unit-based and managed-services contracts. AI agents are being embedded directly into delivery frameworks, allowing the company to offer productivity-linked and outcome-based pricing models.
Jefferies noted that while this shift could strengthen Wipro's competitive positioning over time, it may suppress reported revenue growth for the next five to six quarters as productivity gains are shared with clients before contract renewals allow the company to capture a larger share of the value created.
Margins are also expected to remain under pressure in the near term. Wage hikes, continued investments in AI capabilities and employee reskilling initiatives are likely to weigh on profitability in the June quarter.
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