Wipro’s mega deal win ushers confidence, but it has a long way to go

Top-tier IT services provider Wipro Ltd bagged a mega deal worth 500 million pounds from Phoenix Group—the UK’s largest long-term savings and retirement business. The 10-year strategic project is designed to deliver life and pension business administration for the ReAssure business and accelerate Phoenix Group’s operational transformation.

In the IT industry, mega deals are large-scale, high-value contracts, typically with a total contract value (TCV) of $500 million or more. Such deals are a significant driver for a technology company’s revenue growth trajectory. This is Wipro’s second mega-deal over the past four quarters and is notable since it marks its entry into an account that has been a stronghold for peer Tata Consultancy Services Ltd (TCS), said a Kotak Institutional Equities report dated 27 March. In June, Wipro had announced a $500-million mega deal with a US-based communications service provider for a period of five years.

“The (Phoenix Group) deal would ramp up gradually from the December 2025 quarter (Q3FY26) and fully ramp up by end-FY2026E,” added the Kotak report. Of course, execution challenges and the impact on operating margin as the deal ramps up would be key to track here.

Still, this is positive given that Wipro is experiencing a turnaround under the leadership of CEO Srinivas Pallia, who took over the role in April last year. “Wipro has had multiple false starts under past CEOs. It needs to continue to deliver similar surprises to lend credibility to the current turnaround effort,” said the Kotak report. In mid-March, Wipro announced the realignment of its global business lines into four key areas – technology services, business process services, consulting services, and engineering – effective April 2025. The aim is to better align with client needs and capitalize on opportunities in AI, cloud, and digital transformation.

Renewed uncertainty

But now, the sector faces renewed macroeconomic uncertainty in key markets of the US and Europe due to trade tariff tensions. This is feared to put the sector’s FY26 revenue growth visibility in limbo and, consequently, could hinder Wipro’s turnaround efforts on slower deal conversions into revenue. There is already some disappointment on this parameter. For Q4FY25, Wipro’s sequential constant currency (CC) revenue growth guidance of -1% to +1% was below analysts’ expectations, reflecting the pain in Europe and Asia Pacific, Middle East and Africa (APMEA) regions.

According to Motilal Oswal Financial Services, Wipro will likely report flat revenue in Q4FY25 (midpoint of its Q4 guidance) as softness may persist in energy, manufacturing and resources, along with Europe and APMEA regions. “BFSI (banking, financial services and insurance) may perform better sequentially due to uptick in budgets and Capco business. Healthcare will also grow, but slower than in the past,” it said in its latest report, adding that Wipro margins should remain around 17-17.5%, with no major headwinds.

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Wipro’s IT services sequential CC revenue grew 0.1% in Q3FY25, beating consensus estimate of -0.5%. In the upcoming earnings season, Q1FY26 CC revenue guidance and recovery in Europe will be crucial.

Deal wins of $3.5 billion in Q3FY25 were steady sequentially, but fell 7% year-on-year. The TCV of large deals at $961 million, a four-quarter low, was down 35% sequentially.

Meanwhile, the Wipro stock is up 9%, ahead of the Nifty IT index, aided by a gradual earnings recovery, but the weakness in select verticals and geographies could keep revenue growth volatile. Bloomberg data showed that the stock is trading at FY26 price-to-earnings of 21x, a discount to TCS, Infosys Ltd, HCL Technologies and Tech Mahindra Ltd. For now, the gap in valuations is expected to sustain.