Wipro Reports Strong Q3 Results, Shares Surge 13%

Shares of Wipro, one of the leading IT companies, soared 13% after the release of its Q3 results. The company’s strong performance indicates a potential turning point, surpassing analysts’ expectations and showing signs of improvement in discretionary spending.

Wipro’s Q3 revenue degrowth came in towards the upper end of the guided range, which is a positive trend compared to the past four quarters. The company’s consulting business, CAPCO, witnessed double-digit booking growth, suggesting a rebound in discretionary spending.

Analysts at JM Financial believe that as the business environment improves, Wipro is positioned for further growth and recovery. However, Axis Securities has maintained a ‘Sell’ rating on the stock, citing the need for more visibility in Wipro’s execution.

HDFC Institutional Equities noted that Wipro’s trajectory is recovering after a decline in quarterly revenue rate over the past three quarters. Despite positive commentary on the consulting business, Wipro’s growth markers remain stressed, including a loss in deal market-share to peers and a decline in T5 accounts.

Wipro’s Q3 revenue degrowth was 1.7% on a constant currency basis, slightly outperforming analyst projections of a 2-4% degrowth. The company’s rigorous cost control measures also enabled a margin beat of 50 basis points.

Motilal Oswal expects Wipro’s revenue growth rate for FY24 to be among the lowest in the tier-1 IT services pack. The company’s margin is also predicted to be below the management’s medium-term guided range.

While Wipro’s Q3 performance is encouraging, market experts are still cautious and await further evidence of the company’s execution of its refreshed strategy. The stock has experienced a significant rally, but its correlation between deal-wins and top-line growth remains low.