Wipro (WIT) Q2 2027 earnings review
Wipro's profitability improves, but new orders fall by a quarter
Wipro held its sales steady and improved its profitability, but it won far fewer new contracts. IT services sales were flat from last quarter and grew under 1% from a year ago. New orders fell to $2.6 billion, below the quarter's sales. Chief executive Srini Pallia said investments "are beginning to deliver results".
| IT services sales, at constant exchange rates | +0.6% from a year ago; flat from last quarter |
|---|---|
| New orders (total bookings) | $2.6 billion $3.4 billion last quarter |
| IT services operating margin | 16.5% 16.0% last quarter |
| Next-quarter sales outlook, constant currency | −1.5% to +0.5% middle of the range: down 0.5% from this quarter |
⚖️ Verdict: 🔴 Bearish
The story got worse because the order book meant to feed revenue has run down. Bookings fell below a quarter's sales, and the next-quarter outlook again plans for a decline, acquisitions included. The good news: the margin recovered half a point despite a full quarter of higher pay, and cash from operations ran well above profit.
The question now is whether this quarter's orders are a gap between large contracts or the new level. If last year's large deals still turn into revenue, sales can hold while orders recover. If clients cut work as AI tools get cheaper, sales follow orders down. Next quarter's bookings will tell.
🐂 Bull Case
Profit Margin Recovered Half a Point
Wipro's IT services arm kept 16.5% of sales as operating profit, up from 16.0% last quarter. Finance chief Aparna Iyer said the company delivered the gain "even while continuing to invest in our business and people", and the quarter carried the full cost of this year's pay rise, which only partly hit the previous one.
The cost of delivering services fell 0.3 points of group revenue from last quarter, to 71.1%. Europe and the unit serving US banks and manufacturers carried the improvement, but the other US unit earned less, and the margin is still 0.2 points below a year ago and below the 17% band Wipro has told investors it aims for.
What to watch: the IT services margin next quarter, set against an outlook for lower sales. A reading at 16.5% or above while revenue slips would mean cost work rather than volume is driving the recovery.
Cash From Operations Reached 166% of Profit
Wipro collected far more cash than it booked as profit. Operating cash flow was ₹53.0 billion, or 166% of net income. Free cash flow after equipment spending rose 57% from a year ago, and finance chief Aparna Iyer said the company remains "relentless in driving cash flow conversion".
Part of the strength is timing. Customers paid down ₹3.6 billion of receivables in the quarter, and that cash is in hand. But Wipro paid ₹9.3 billion of income tax in the half year against ₹19.8 billion charged, so tax it still owes sits inside the cash figure.
What to watch: income tax paid in the second half. If payments catch up with the charge, cash flow falls back toward profit, and the first half's conversion was a timing gain rather than a new level.
Europe's Recovery Now Lifts Profit Too
Europe was Wipro's problem unit a year ago, with sales falling from the year before. This quarter sales there rose 13.5% in rupees from a year ago, or about 4% in dollars by our math once the rupee's fall is removed, and the unit is now the group's second-largest.
The unit also earns far more. Its operating margin reached 16.7% of sales, up from 11.7% a year ago. That is the combination Wipro needs across the group, though acquisitions made over the past year sit inside the comparison and Wipro has not said how much of Europe's growth they supplied.
What to watch: Europe's margin next quarter. Holding above 15% would mean the step up came from how the unit runs its contracts, not from a one-quarter mix effect.
Positives this quarter didn't test
Two parts of the positive case appeared in the results release as announcements rather than as numbers, so this quarter neither confirms nor weakens them.
- AI-native unit: chief executive Srini Pallia cited "momentum across our AI-Native Unit and AI offerings portfolio", and the release lists a North American public-services client that will run enrolment on an "AI-native digital operations platform". The release gives no revenue figure for the unit; one would move the case.
- Last year's large deals: Wipro has said big contracts take two to three quarters to turn into revenue. With new orders now below sales, revenue holding steady next quarter would show those contracts are still delivering.
🐻 Bear Case
New Orders Fell Below the Quarter's Sales
"The strategic investments we have been making are beginning to deliver results," chief executive Srini Pallia said, adding that they help Wipro "win in new markets, add new clients, and grow existing relationships". The order book says otherwise. Total bookings, the value of all contracts signed in the quarter, fell to $2.6 billion from $3.4 billion three months earlier.
- Total bookings: $2.6 billion, down 23% from last quarter in constant currency
- Large deals (contracts of $30 million or more): $674 million, down 59% from last quarter
- Bookings divided by quarterly revenue: 0.99 times, from 1.29 last quarter
- Bookings over the past twelve months: $12.8 billion, down 26% from the year before by our math
For the first time in at least two years, Wipro signed less work than it billed. Part of last year's record intake was tied to the Olam contract that came alongside the Mindsprint purchase, so the comparison was always going to be hard. But the level itself is the problem, because a quarter of orders below revenue leaves nothing new for later quarters to draw on.
What to watch: total bookings next quarter. A second quarter below $3 billion would mean the fall is the new level rather than a gap between large contracts, and revenue would follow orders down through next year.
Sales From Last Year's Businesses Keep Shrinking
Wipro's IT services revenue grew 0.6% from a year ago at constant exchange rates. The figure includes a full quarter from three businesses absent a year earlier: the Harman engineering unit bought last December, Mindsprint, Olam's IT arm bought in May, and the Alpha Net contracts bought in June.
Wipro has not said how much the three added. Finance chief Aparna Iyer said at the December-quarter results that Harman added 0.8 points of growth from one month, which by our math points to about 2 points for a full quarter. On that basis, sales from businesses Wipro owned a year ago fell about 2%, before counting the other two.
The shrinkage sits in the Americas, which supply about 60% of IT services sales, and the next-quarter outlook plans for another decline in dollars with all three purchases inside it.
- Americas 1 (US consumer, health and technology clients): sales up 5.5% in rupees, about 3% lower in dollars by our math
- Americas 2 (US banking, energy and manufacturing clients): up 3.1% in rupees, about 5% lower in dollars by our math
- Americas 1 margin: 18.8% of sales, from 21.4% a year ago
What to watch: the acquisitions' share of growth, which Wipro disclosed once for Harman and not since. A figure above 2 points would confirm the underlying decline is steeper than the headline shows, and the US units are where it would have to turn.
Buyback Lifts Profit per Share While Profit Falls
Wipro headlined a 4.2% rise in profit per share from a year ago. Net profit fell 1.9%. The company bought back 600 million shares in June, so the share count dropped 5.5% and each remaining share got a bigger slice of a smaller profit.
Operating profit rose 7.4% in rupees, so the fall came below the operating line. Finance expenses rose 51% after Wipro repaid its $750 million bond in June and replaced it with bank loans. Income from cash and investments also fell, because the ₹150 billion buyback and the Mindsprint purchase drew down the cash pile that earned it.
What to watch: net finance income, ₹1.3 billion this quarter against ₹4.8 billion a year ago. If it stays there, profit per share can only rise if operating profit does, because the share count has stopped shrinking.
Risks this quarter didn't answer
Four standing concerns got no new reading in the results release, which carries no management commentary beyond two short statements from the chief executive and the finance chief.
- AI pricing pressure: whether clients pay less on renewals as AI tools cut the labour in run-and-maintain work. The release gives no pricing comment; a disclosed concession on renewals would move the case.
- Margin target timing: the 17% to 17.5% band still has no date attached. A date, or a next-quarter margin above 16.5%, would move it.
- Integration: Harman, Mindsprint and Alpha Net were bought within seven months; the purchase accounting for the last two is still provisional and the release gives no revenue or staff-retention figures for them.
- Client-specific weakness in the Americas: the release gives unit revenue but no account-level comment; a second quarter of dollar decline in both US units would show the problem is broader than individual clients.
💲 Other KPIs
Contract liabilities, the cash customers have paid for work not yet delivered, grew 6.5% from a year ago, less than the 9.1% rise in group revenue in rupees. The balance has fallen 10.7% since March, so clients are prepaying a smaller share of the work ahead.
Cash and short-term investments minus loans rose ₹33 billion in the quarter after falling by about ₹157 billion in the previous one, when Wipro paid for the buyback and Mindsprint. The company repaid its $750 million bond in June and replaced it with bank loans, which have nearly doubled since March.
Fixed-price and volume-based contracts, where Wipro keeps the gain when it does the work with fewer people, made up 52.1% of IT services revenue, up from 51.4% a year ago. Last quarter it was 53.4%, and the share has stayed within a narrow band for six quarters.
Staff turnover held at 13.8%, down from 14.9% a year ago and the lowest reading in the five quarters we track. Lower attrition cuts hiring and training costs, which supports the margin. Wipro reports more than 230,000 employees.
🔮 Guidance
New. The plan has IT services sales falling about 0.5% from this quarter at the middle of the range, the third quarter in a row with a negative midpoint. By our math that is 1.4% below the year-earlier quarter in dollars, with the Harman, Mindsprint and Alpha Net purchases inside it. Wipro has landed inside its range in six of the last eight quarters, most recently in the upper half.
❓ Key Questions
How much growth came from the three acquisitions?
Harman, Mindsprint and Alpha Net all sit inside the 0.6% constant-currency growth figure. Wipro disclosed Harman's contribution once and nothing since, so readers cannot see whether the underlying business shrank again.
Why did new orders fall below quarterly revenue?
Total bookings of $2.6 billion were the lowest in at least two years. Were deals delayed, lost, or smaller, and what was the annual contract value signed rather than total contract value?
When does the margin return to the 17% band?
The margin recovered to 16.5% but the band Wipro has described as its aim still carries no date. The next quarter's lower sales outlook makes the path harder.
Are clients paying less on renewals because of AI tools?
Wipro says AI expands its market. The release gives no pricing or productivity-sharing detail on renewed contracts, which is where a deflation effect would appear first.
How much income tax will Wipro pay in the second half?
Tax paid in the first half was ₹9.3 billion against ₹19.8 billion charged, and unpaid tax rose ₹13.8 billion since March. Catch-up payments would lower the cash conversion the company highlights.