Wipro has received a Hold rating from Prabhudas Lilladher with a target price of ₹260, reflecting mixed performance indicators and cautious outlook for the IT services company.

Q3 Performance Analysis

The company's Q3 revenue growth demonstrated resilience with a 1.4% quarter-on-quarter increase in constant currency terms, aligning closely with analyst estimates of 1.5% QoQ growth. The performance was bolstered by strategic initiatives and acquisitions.

Despite facing negative seasonality in Capco, the company achieved positive organic growth of 0.6% QoQ in constant currency. This growth was multi-faceted across various business units, including Financial Services, indicating broad-based momentum.

Q4 Outlook and Challenges

The organic growth momentum faces headwinds in Q4 due to execution deferrals in large deals, particularly affecting the NN component. The brokerage's analysis suggests Q4 organic guidance of -1.5% to +0.5% QoQ in constant currency, which translates to a two-month inorganic contribution of +1.5% QoQ.

The guidance becomes more concerning when considering the expected improvement in Capco seasonality during Q4, suggesting underlying business softness beyond seasonal factors.

Deal Pipeline and Execution

While the company has shown strong performance in securing business, execution remains a key challenge:

• Large deals for 9MFY26 increased by 77% year-on-year
• Bookings grew by 25% year-on-year
• Execution challenges persist despite improved deal wins

Margin Outlook and Integration Impact

The full integration of Harman is expected to dilute service margins in FY27 before integration benefits materialize in FY28E. This temporary margin pressure reflects the investment phase of the acquisition.

Investment Recommendation

Prabhudas Lilladher assigns a 17x multiple to FY28 EPS, resulting in a target price of ₹260. The Hold rating reflects a balanced view of the company's growth prospects, considering both the positive deal momentum and execution challenges ahead.

Wipro delivered a mixed third-quarter performance, with revenue beating analyst estimates despite facing margin pressures from elevated costs. The IT services major reported steady demand traction across key international markets, though profitability metrics came under pressure.

Financial Performance Overview

The company's quarterly results showed strong revenue performance but weaker profitability metrics compared to estimates and previous periods.

Margin Analysis

Profitability margins faced significant pressure during the quarter, reflecting the impact of rising operational costs.

The EBITDA margin decline was primarily attributed to higher employee costs and elevated general and administrative expenses, which offset the benefits of operating leverage. Net profit margin compression of 179 basis points year-on-year reflected both operating margin pressure and higher effective tax outgo.

Regional Performance

Geographical revenue mix remained broadly stable sequentially, with varying performance across different regions:

• Europe: 26.7% of revenue, sustaining growth momentum
• APMEA: 11.1% of revenue, maintaining growth trajectory
• Americas 2: 29.0% of revenue, remained soft and weighed on overall topline acceleration

The steady demand traction and improved execution across Europe and APMEA regions helped drive the better-than-expected revenue performance, while softness in Americas 2 continued to pose challenges.

Analyst Outlook and Valuation

Deven Choksey projects revenue and earnings compound annual growth rates of 3.6% and 1.1% respectively over FY25-FY27E. The brokerage maintains an 'Accumulate' rating on the stock with a target price of ₹272, applying a price-to-earnings multiple of 20x to December 2027 estimated earnings per share. The stock currently trades at 19.8x FY27E earnings, suggesting modest upside potential based on the analyst's valuation framework.