Wipro Says AI is the Future, But Legacy Drag Keeps Growth and Margins in Check

Wipro's artificial intelligence pitch may be running well ahead of its financial performance.

India's fourth-largest IT services exporter on July 16 reported June-quarter revenue of $2.61 billion, up a mere 0.9% year-on-year in constant currency, while IT services operating margin slipped 120 basis points to 16%.

This comes even as Chief Executive Officer Srini Pallia devoted much of the earnings call to describing AI as a "structural opportunity" that is "expanding the market, not shrinking it."

For the September quarter, the company guided to a sequential range of -1.5% to +0.5%, leaving open the possibility of a fourth consecutive quarter of underwhelming growth.

The disconnect matters because Wipro, like most of its Indian IT peers, is pinning its recovery story on AI: an AI-native business unit, a proprietary delivery platform called WINGS, an Applied AI Centre of Excellence built around Anthropic's Claude models, and a slew of AI-linked large-deal wins.

Yet the quarter's actual drivers of margin pressure were wage hikes, the slow ramp-up of previously won low-margin deals, and now, AI investment itself, despite the rupee depreciation benefits that the company has received.

Growth Stays Flat

Wipro’s net income during the quarter rose 0.6% year-on-year to ₹33.6 billion, and EPS grew at the same pace to ₹3.20, both aided by a weaker rupee.

Geographically, the Americas, Wipro's largest market, stayed weak. Americas 1 was flat year-on-year and down 2.3% sequentially, while Americas 2, which houses the entire business of Canada alongside the core industry sectors in the United States like banking, financial services, insurance, manufacturing, energy, and utilities, fell 7.3% year-on-year. 

Europe grew 6% year-on-year on the back of BFSI ramp-ups, and APMEA was the standout, up 13.5% year-on-year and 4.4% sequentially. 

Total bookings came in at $3.4 billion, and large-deal bookings, which are deals above $30 million, were $1.6 billion across 13 deals, up 12.9% sequentially but down sharply from the $2.7 billion booked in the year-ago quarter.

Margin Pressure

Responding to questions on when margins would return to Wipro's stated 17%-17.5% band, Pallia declined to give a timeline, citing volatility in revenue and demand.

“Despite the challenges with the revenue, we continue to stay focused on margin improvements. You can rest assured we will continue that path. However, I want to clearly articulate that we want to invest in our new AI-native business,” Pallia said during the earnings call. He further added that in the AI-native business, the right talent and infrastructure to build new products are critical.

Opportunity and Threat

On the competitive intensity in large deals, Pallia said AI is compressing the traditional IT and BPO budgets that have long been Wipro's bread and butter, even as it opens a separate, newer pool of AI-linked spending that the company is chasing.

He said AI was reshaping IT spending, with clients reducing budgets for traditional IT and BPO services. Rising AI token costs were also pushing Wipro to price large deals based on total cost of ownership instead of the industry's long-standing effort-based, per-person-month model.

Pallia’s characterisation of deal economics reinforced the point that cost-optimisation and vendor-consolidation deals will keep facing margin pressure because Wipro has to "invest in the deals for now" to make them more long-term.

In practice, that means Wipro's largest and most visible deals may stay margin-dilutive for some time yet, with profitability improvement concentrated in smaller, newer engagements that do not yet move the overall number.

For Wipro, the challenge is no longer convincing investors that AI represents the next growth engine. It is proving that the billions being invested in AI talent, platforms and infrastructure can translate into faster revenue growth and healthier margins before legacy IT spending erodes further.