Wipro ADRs plunged as much as 17% overnight, signaling significant investor concerns about the company's future earnings outlook and the impact of artificial intelligence on traditional IT services. According to Goodreturns, the stock opened sharply lower after trading around USD 2.22 in pre-market, gapped down to nearly USD 2.05, and continued to slide throughout the session on heavy trading volumes. The sell-off represents one of the stock's steepest single-session declines in recent years. In contrast, Wipro shares in the domestic market were trading 2.68% higher at ₹174.69 at the time of writing, while the broader Nifty IT index is trading at 26,906, 4.42% higher than the previous close. The stock has already lost substantial ground, currently trading at ₹170.35, down 54% from its record high of ₹369.93 touched on October 14, 2021. This represents a further escalation from the previous 14% decline reported earlier this week.
The biggest trigger behind the sharp decline was JPMorgan's downgrade of Wipro to 'Underweight' from 'Neutral' and reduction of the target price to USD 1.70 from USD 2.20. As reported by Goodreturns, the global brokerage warned that market expectations are too optimistic despite deteriorating business conditions. JPMorgan estimates Wipro is likely to guide for flat to a 2% sequential decline in revenue during Q2 FY27, due to weakness in client spending. The brokerage stated that the demand environment for Indian IT companies is currently challenging, particularly as generative artificial intelligence (AI) increasingly pressures traditional IT services by reducing billing rates and accelerating automation. The contrasting performance with global peers suggests the weakness is largely company-specific rather than the result of a broader sell-off in global technology stocks.
Motilal Oswal Financial Services has projected a weak performance for Wipro in the June quarter or Q1 FY27. According to Goodreturns, the brokerage stated that IT services revenue declined by 1.3% QoQ in constant currency, citing delayed project ramp-ups, weakness from a large client, and slower demand from the US banking, financial services and insurance (BFSI) sector. Margins are also expected to be under pressure, with operating margins estimated to decline by around 110 basis points to 16.1%, impacted by annual wage hikes, investments in AI capabilities, and lower-margin deal ramp-ups. This weak outlook has reinforced investor fears that enterprises remain cautious on spending related to IT consulting and digital transformation projects.
The IT sector continues to face multiple headwinds beyond AI disruption. Accenture's decision to trim the upper end of its annual revenue growth forecast has revived concerns over weak discretionary technology spending, reinforcing investor fears that enterprises remain cautious on spending related to IT consulting and digital transformation projects. According to The Economic Times, JPMorgan has downgraded Wipro, HCL Technologies and Tata Technologies to underweight, stating that current valuations do not fully reflect recent corrections. The brokerage expects further cuts to FY27 revenue growth estimates, noting that "with a softer start to the year, the ask rate for FY27 gets tougher, as the usual 1H strength is unlikely to play out this time." JPMorgan recently downgraded Wipro to "Underweight" from "Neutral" and lowered its price target to $1.70 from $2.20, citing mounting pricing pressure from generative AI along with weak demand as key headwinds for Indian IT services companies.
