Wipro's Q3FY26 results: Net profit declines 7% to ₹3,120 crore

Wipro's Q3 profit fell 7% year-on-year due to labour code impact, even as IT services revenue beat estimates and margins improved on cost controls

Wipro on Friday reported a 7 per cent on year dip in its net profit for the third quarter of financial year 2026 (Q3FY26), a fall which the IT firm largely attributed to one-time labour-code related adjustments even as its revenue soared.

 

India’s other IT services giants TCS, Infosys and HCLTech too have reported drop in profit in the third quarter due to the implementation of labour codes.

 

Wipro’s net profit was down 7 per cent to ₹3,120 crore year-on-year (Y-o-Y). The impact, resulting from the implementation of the labour codes, was an additional ₹302 crore due to rising gratuity expenses and was among the lowest in the industry.

 

 

IT services segment revenue, the critical benchmark, rose 0.2 per cent year-on year to $2.6 billion while gross revenue was up 5.5 per cent to ₹23,560 crore.

 

While the revenue came above Bloomberg estimates, the net profit was below expectations.

 

On a constant currency basis, which excludes the impact of currency fluctuations over which companies have no control, IT services segment revenue was up 1.4 per cent sequentially. Those numbers came almost at the top end of the guidance it provided in October when it said revenue will either de-grow by 0.5 per cent or grow at 1.5 per cent.

 

For the fourth quarter, the company expects revenue from its IT Services business segment to be in the range of $2,635 million to $2,688 million, which translates to sequential guidance of 0 per cent to 2 per cent in constant currency terms. 

 

More than half of that growth came from the acquisition of the digital transformation solutions (DTS) business of audio products maker Harman in August. That added 0.8 per cent to without which it would have been down to 0.6 per cent.

 

Chief executive officer and managing director Srini Palia said the company will have a better visibility into client discretionary spending this month as they firm up their technology budgets this month though the priority lay in cost take out deals, vendor consolidation, and improving efficiency through artificial intelligence (AI).

 

A robust deal pipeline, backed mainly by the large deals signed earlier in the financial year which have started contributing incrementally, helped Bengaluru-based Wipro to improve its guidance. It now expects revenue sequentially to remain flat or grow by two percent in the fourth quarter.

 

Palia has been banking on large deals to turn around the fortunes of the company which has lagged its peers for more than a decade. Wipro’s 500 million-pound deal with Phoenix has also started generating revenue as the project ramps up.

 

Wipro’s total contract value, however, slowed down considerably in the third quarter to almost a six-quarter low to $3.3 billion. Large deals, classified as those above $30 million, was down 9.3 per cent to $871 million year over year.

 

However, such deals, which are mainly cost optimisation and vendor consolidation programs, are also slow to ramp up and take time to materialise. In a demand environment which is already subdued, large deals would also mean fierce competition among IT services players which usually eats into the margins.

 

Operating margins inched up 10 basis points to 17.6 per cent compared to last year as the company slashed cost and also undertook a restructuring exercise of ₹263 crore in its Europe and Capco business, which remained flat. It was also aided by the depreciation of the rupee.

 

“This is our best margin performance in the last few years. Our continued focus on execution rigour also reflects in our strong operating cash flow of 135 per cent of net income in Q3,” said chief financial officer Aparna Iyer.

 

Out of the four strategic market units, Americas 1 grew by 2.8 per cent while Americas 2 and Europe fell by 5.2 per cent and 4.6 per cent respectively on a constant currency basis.

 

Banking financial services and insurance (BFSI), was up 0.4 per cent and technology and communications business went up 3.5 per cent as clients adopt more AI in their business for enhancing customer experience. Consumer and energy business was down 5.7 per cent and 5.8 per cent as the impact of tariffs continued to bleed clients.

 

Wipro’s attrition came down to 14.2 per cent from 14.9 per cent sequentially and its headcount increased by 6,529 to 242,021 at the end of December. Most of the addition flowed in as the Harman business integrated.

 

The company expects to hire about 7,500 to 8,000 freshers this fiscal against its target of 10,000.