Wipro Shares Surge 13% After Better-Than-Expected Q3 Results

Shares of Wipro, one of the leading IT firms, witnessed a significant surge of 13% today after the announcement of its Q3 results. This rise comes after a positive response to the company’s American Depository Receipts (ADRs), which soared nearly 18% to reach a 20-month high. Wipro’s positive performance in Q3 indicates green shoots in discretionary spending, setting it apart from other IT majors.

With the stock hitting a 52-week high of Rs 526.45, Wipro is currently up 15% in the last one month. HCL Technologies Ltd, Infosys Ltd, and Tata Consultancy Services Ltd have experienced more modest gains during the same period.

Analysts at JM Financial noted that Wipro’s Q3 revenues degrowth reached the upper end of the guided band, a significant improvement compared to the past four quarters. Additionally, the double-digit booking growth of CAPCO, Wipro’s consulting business, is seen as an early sign of a rebound in discretionary spending.

However, cautious optimism prevails among analysts, who are hoping for further evidence before turning fully bullish on the Wipro stock. Axis Securities highlighted Wipro’s lagging execution and lack of visibility, recommending a ‘Sell’ rating. Similarly, HDFC Institutional Equities stressed Wipro’s stressed growth markers, such as deal market-share loss, sector-wide decline, and a steep drop in T5 accounts.

Wipro’s constant currency (CC) revenue degrowth of 1.7% for the quarter was slightly better than analyst projections. The company’s focus on driving growth through its partner ecosystem and improvements in the operating structure are seen as positive steps. However, concerns remain about Wipro’s ability to achieve a quick demand recovery, reflected in its YoY decline in TCV and revenue guidance for Q4FY24.

Motilal Oswal, while retaining a ‘Neutral’ stance on the stock, expects Wipro’s revenue growth rate for FY24 to be among the lowest in the tier-1 IT services pack. Additionally, a margin below the management’s medium-term guided range raises further concerns. Nuvama Institutional Equities also anticipates underperformance compared to peers but highlights the stock’s inexpensive valuation and high dividend yield as limiting the downside potential.

Overall, Wipro’s Q3 results indicate a positive trend, but industry experts remain cautious and await further evidence of the company’s execution and ability to sustain a successful turnaround.