Wipro shares tumbled over 9% in early trade following the company's mixed third-quarter results and cautious outlook for Q4. The IT services major's stock hit an early low of Rs 241.55, trading at Rs 247.40 with a 7.5% decline as brokerages remained divided on the company's prospects despite margins beating expectations.

Q3 Financial Performance Analysis

The company reported a net profit of Rs 3,119.00 crore for the third quarter, marking a 7% year-on-year decline. Gross revenue rose marginally to Rs 23,560.00 crore, up 0.2% year-on-year, while IT services revenue reached $2.60 billion with sequential constant-currency growth of 1.4%.

The sequential revenue growth came in at the upper end of guidance, though analysts noted that organic momentum remains weak with organic growth at just 0.6%.

Margin Performance and Operational Metrics

Consolidated margins contracted to 14.80% due to one-off impacts from the new labour code and restructuring costs. However, IT services margins showed improvement to 17.60% despite seasonal weakness and ramp-up costs for a large Phoenix deal.

Q4 Guidance and Harman Acquisition Impact

Wipro provided Q4 guidance of 0-2% constant currency growth, with the recently announced Harman acquisition expected to contribute significantly. The company revised its fresher hiring guidance for FY26 to 7,500-8,000 graduates, down from the original target of 10,000-12,000.

Mixed Brokerage Reactions

Brokerages delivered contrasting assessments of Wipro's performance. HDFC Securities maintained an optimistic tone with an "add" rating and target price of Rs 290, highlighting the company's return to growth trajectory. JM Financial retained a "buy" rating despite describing the quarter as "lacklustre," citing undemanding valuations and potential for capital returns.

Elara Capital remained firmly bearish, reiterating its "sell" rating while raising the target price to Rs 220, emphasizing that organic growth is likely to stay weak despite Harman's contribution.

Sector Challenges and Deal Pipeline

The company faced headwinds across multiple verticals, with growth impacted by slower ramp-up of large deals and weakness in the EMR vertical. While some recovery was noted in the BFSI segment, other areas including energy and consumer verticals continued to struggle with tariff-related challenges and deal pauses.

The mixed performance reflects broader challenges in the IT services sector, with analysts emphasizing that better execution and stable conversion of deal TCV into revenue will be critical for improved outlook.

Wipro shares experienced a sharp decline of 9% in early trading on Monday following a downgrade from Morgan Stanley and concerns over the company's fourth-quarter guidance. The IT services major closed at ₹242.80, reflecting investor concerns about the company's near-term growth prospects.

Morgan Stanley Downgrade Details

Morgan Stanley downgraded Wipro from "equalweight" to "underweight" and significantly reduced its price target. The brokerage's revised outlook reflects concerns about the company's execution capabilities and competitive positioning.

The brokerage noted that while Wipro had previously shown improvement in deal wins and margin performance, helping narrow the price-to-earnings multiple gap with peers over the past 12 months, recent developments suggest this convergence may reverse.

Weak Q4 Guidance Triggers Concerns

Wipro's guidance for the fourth quarter has disappointed analysts and investors alike. The company projected constant currency revenue growth significantly below market expectations, indicating challenges in converting pipeline deals into actual revenue.

Morgan Stanley highlighted that this weaker guidance suggests slower deal conversion rates and reduced growth visibility for the upcoming financial year compared to industry peers. The brokerage expects this performance gap to widen the price-to-earnings multiple discount that had recently narrowed.

Broader Analyst Sentiment

Jefferies maintained its cautious stance on Wipro, keeping its "underperform" rating with a ₹220 price target. The brokerage cited softer deal bookings and delays in project ramp-ups as key factors behind the disappointing guidance. Additionally, Jefferies expects margin pressure to continue due to recent acquisitions and the gradual scaling of new deals.

The overall analyst community remains divided on Wipro's prospects. Among 47 analysts covering the stock, the distribution reflects mixed sentiment:

• Buy ratings: 11 analysts (23.40%)
• Hold ratings: 21 analysts (44.68%)
• Sell ratings: 15 analysts (31.91%)

Market Performance

Wipro's stock performance reflected the negative sentiment across markets. The company's American Depositary Receipts (ADRs) had already declined 7.40% in Friday's trading session on Wall Street, foreshadowing Monday's domestic market reaction. The 9.30% decline in Indian markets brought the stock price to ₹242.80, aligning closely with Morgan Stanley's revised price target.