Tech Mahindra maintains edge over Wipro in September quarter
Wipro Ltd shrank for a second straight quarter as its media, technology and healthcare businesses weakened, while Tech Mahindra Ltd leveraged its Orange deal to post its fastest September-quarter growth in three years on Thursday.
India’s fourth-largest information technology (IT) company Wipro ended the second quarter of fiscal year 2026-27 (FY27) with revenue of $2.61 billion, down 0.1% sequentially and up 0.28% year-on-year. The decline was largely driven by its media, technology and healthcare clients, which together account for about a third of its business. It was also Wipro’s first second-quarter revenue decline in three years.
About 1,000 miles north, at New Delhi’s ITC Maurya, the country’s fifth-largest IT company Tech Mahindra reported a stronger quarter, with revenue of $1.69 billion, up 1.99% sequentially and 6.7% year-on-year. Nearly all its incremental growth came from telecom clients, particularly a large deal with French telecom company Orange. Telecom providers account for a third of Tech Mahindra’s business.
The performance was underpinned by management’s optimistic outlook that market opportunities for Tech Mahindra would expand.
“Clients have always been expecting productivity. Maybe the expectations are slightly higher now. But what is also happening is, and we give a couple of examples, where there is a strong modernization imperative. There is a strong imperative to build sort of new and rationalized data estates, new applications are being created,” said Mohit Joshi, chief executive of Tech Mahindra, during the company’s post-earnings press conference.
However, the mood was more subdued down south.
“In this quarter, the demand environment has remained largely unchanged. Our clients remain focused on efficiency and productivity, while increasingly looking to accelerate AI adoption and drive long-term value,” said chief executive Srini Pallia, during the company’s press conference from its Bengaluru office on Thursday.
He added that the company faced a client-specific issue and slow growth in healthcare that hurt its performance.
The company’s commentary was reflected in its outlook, as management retained its July guidance of (-) 1.5%- 0.5% growth in constant currency terms. To be sure, Tech Mahindra does not issue quarterly or full-year guidance, but its management expects more work around legacy technology modernization.
Investors in the US gave Wipro a thumbs-up, with its shares on the New York Stock Exchange jumping 3.9% as of 8pm IST.
Demand outlook
The performance comes amid an uncertain demand environment, with clients holding back on discretionary technology spending amid macroeconomic uncertainty stemming from the West Asia war. Automation tools have also pushed Indian IT services firms to pass on cost savings to clients, potentially cannibalizing their own revenue in the hope that clients will use those savings to buy more services.
For now, Tech Mahindra sounded more optimistic than three of its larger peers. While the country’s largest IT services company, Tata Consultancy Services Ltd, said the demand environment remains unchanged, and non-essential client spending is under scrutiny, the third-largest player HCL Technologies Ltd believes the environment remains fluid as the demand is influenced by various factors.
TCS and HCLTech ended last quarter with $7.64 billion and $3.72 billion in revenue, up 0.2% and 2% on a sequential basis, respectively.
Both Wipro and Tech Mahindra beat analyst estimates. The 33 analysts polled by Bloomberg had expected Wipro to report revenue of $2.59 billion, while the 37 analysts covering Tech Mahindra expected revenue of $1.66 billion.
Still, Wipro reported a second consecutive quarter of revenue decline, the first such streak in three years. It ended the first half of FY27 with revenue of $5.23 billion, up 0.7% from a year ago. Tech Mahindra fared better, with revenue rising 6.4% year-on-year to $3.35 billion.
To match last fiscal year’s revenue, Wipro needs to average $2.62 billion over the next two quarters, implying 0.6% sequential growth in the current quarter. The near-term outlook is uncertain, with its large-deal order book, covering deals worth $30 million or more, at $674 million, its lowest level in nearly four years. Management, however, attributed the dip to deals that “were awarded but not signed”, adding that it expected to close the deals in the current quarter.
Tech Mahindra, by contrast, would need to post its weakest third-quarter performance in at least six years to fall short of last year’s revenue. It would have to report a sequential revenue decline of more than 10% in the next quarter to miss its previous year’s revenue.
Leadership factor
The contrasting performances highlight the changes at the two companies under their new leaders. Wipro has reported revenue declines over the past three years, while Tech Mahindra returned to growth last fiscal and improved profitability faster than its peers. Joshi took over as Tech Mahindra’s CEO in December 2023, while Pallia became Wipro’s CEO in April 2024.
Wipro cut its headcount by 6,716 to 236,328 employees, while Tech Mahindra added 5,446 to reach 152,206. Tech Mahindra’s management said it expects to hire more freshers based on client needs and demand, while Wipro is returning to campus hiring to fill roles requiring specific skills.
The Pune-based IT services company reported an operating margin of 14.8%, up 40 basis points from the preceding quarter. Much of its boost came from volume growth. On the other hand, Wipro ended with an operating margin of 16.5%, up 50bps sequentially. This was primarily due to operational improvements and rupee depreciation. A basis point is a hundredth of a percentage point.
Tech Mahindra’s net profit rose 7.6% to $166 million. On the other hand, the company’s net income fell 4.7% to $334 million.
“Tech Mahindra is on track with its turnaround, especially after they sounded caution last quarter on front-end revenue. For Wipro, they are losing on vendor consolidation deals, which is hurting them, even as things are getting better on the macro end with the model innovation curve getting flattened and AI adoption of enterprises increasing,” said Amit Chandra, vice president at HDFC Securities.