Wipro eyes best day in 4 yrs on echoing hopes of IT peers' demand revival

Wipro beat third-quarter profit estimates and forecast revenue in the current quarter could increase sequentially by up to 1 per cent, compared with no growth last quarter

Wipro's shares surged about 8 per cent on Monday, set for their best day in nearly four years, after India's No 4 IT services company joined its peers in signaling a revival in demand.

The company beat third-quarter profit estimates on Friday and forecast revenue in the current quarter could increase sequentially by up to 1 per cent, compared with no growth last quarter, with CEO Srinivas Pallia saying, "We see discretionary spending slowly coming back" after macroeconomic challenges in 2024.

"The guidance is an improvement from the previous quarter, while the deal bookings, that include small- to mid-sized deals, indicate some revival in discretionary tech spending," said Piyush Pandey, an analyst at Centrum Broking.

Wipro's shares were also among the top percentage gainers on the benchmark Nifty 50 index, which was trading flat. At least eight brokerages raised their rating on Wipro's stock, while 16 raised their price targets, as per LSEG data.

The company's forecast of a more promising 2025 echoed the view of larger peers TCS, Infosys and HCLTech after the $254 billion IT services sector's growth was strangled for several quarters by clients reining in spending due to macroeconomic uncertainties and inflationary pressures.

Wipro's 11 per cent increase in latest-quarter revenue from the BFSI (banking, financial services and insurance) segment, which accounts for about a third of total revenue, shows a pick up in discretionary spending, Jefferies analysts said in a note.

Asian Market Securities' analysts said Wipro's operating margin spiking to a three-year high of 17.5 per cent was much faster than they anticipated and driven by rigour in deal execution.

Wipro expects revenue could range between a drop of 1 per cent and an increase of 1 per cent sequentially in the current quarter.