Fortunes diverged at two of India's largest information technology companies in the June quarter, as Tech Mahindra expanded at the fastest pace in three years, while Wipro clocked its weakest first quarter in the same period.
While fourth-largest Wipro’s revenue fell 1.4% on a sequential basis to $2.61 billion, fifth-largest Tech Mahindra’s revenue jumped 2.2% to $1.66 billion. At Wipro, net profit was down 4.7% from the preceding quarter to $355 million, while Tech Mahindra's net profit rose 6.7% to $154 million. Margins shone for Tech Mahindra, but dimmed at Wipro.
Not surprisingly, the mood at the two managements diverged as well.
“The demand environment—I feel there has been a degree of volatility, but on the whole, we have a good order book, we have a good set of client relationships. We will deliver growth in what is seasonally a hard quarter for us,” Tech Mahindra chief executive Mohit Joshi told reporters at the company’s Hyderabad office.
It was less cheerful down south in Wipro’s Bengaluru headquarters.
“I think discretionary spend is also, you know, going slow at this point in time, and I would say the demand environment from the last quarter of my commentary to this quarter has not changed,” said Srinivas Pallia, CEO of Wipro, at its post-earnings press conference.
Tough days
India's IT companies are navigating one of their toughest eras ever, as the advance of artificial intelligence forces a radical rewrite of the low-cost, labour-intensive outsourcing model that built the nation's $300 billion technology sector. While top IT firm Tata Consultancy Services (TCS) and third-largest HCL Technologies have already announced their first-quarter earnings, second-largest Infosys releases its first-quarter earnings on 23 July.
On Thursday, Wipro had reported its worst first-quarter performance in three years, whereas Tech Mahindra reported its strongest. Tech Mahindra reversed two years of decline, ending FY26 with 1.9% revenue growth, while Wipro saw a third year of revenue decline.
For Wipro, much of the June quarter revenue decline came from energy, manufacturing, and resources firms, which account for about a fifth of its revenue. For Tech Mahindra, most of the growth came from manufacturing firms, which account for a fifth of its revenue.
Wipro performed in line with analyst expectations. According to a Bloomberg poll of 32 analysts, the company was expected to report $2.59 billion in revenue. Its revenue was also in line with its own April guidance of $2.60-2.65 billion.
On the other hand, Tech Mahindra lagged analyst expectations. About 32 analysts polled by Bloomberg expected Tech Mahindra to end with $1.68 billion in revenue.
Guidance
Wipro's muted view of demand was reflected in its guidance. The company expects revenue growth of 0.5% at best and a sequential decline of 1.5% in constant currency terms, which ignores currency fluctuations. Unlike Infosys and HCL Technologies which share full-year revenue guidance, Wipro issues guidance only for the quarter ahead. Tech Mahindra does not give quarterly or full-year guidance.
"Large deals from Orange and Telefonica should ramp up and provide growth visibility for Tech Mahindra," said Sushovon Nayak, lead IT analyst at Anand Rathi Institutional Equities.
While Tech Mahindra was more optimistic, Wipro’s commentary was in line with that of TCS and HCLTech. During the company’s post-earnings analyst call on 9 July, TCS CEO K Krithivasan said the demand environment was unchanged. A week later, HCLTech’s C Vijayakumar said the unchanged geopolitical environment was translating to muted client spending.
One strong point for Tech Mahindra has been its profitability, which jumped 60 basis points sequentially to 14.4% at the end of the quarter. Much of this increase came from bagging deals at higher margins and using automation as part of its deals. While this was the company’s 11th straight quarter of margin increase, Wipro reported its lowest operating margins in almost three years.
Wipro's margins fell 130 basis points to 16%, which management attributed to upfront investments due to large deal ramp-ups, salary hikes to employees, and AI investments.
“Because of low large deal wins, there is no operating leverage for their (Wipro's) margins to grow,” Anand Rathi's Nayak said.
Headcount
In terms of headcount, while Wipro added 888 people to end with 243,044 employees, Tech Mahindra cut headcount by 863 from the previous quarter to end with 146,760 people. The headcount changes come amid rising fears of AI eroding the revenue of IT firms, as much of their work could be automated.
"Wage hike and delayed ramp ups will keep Wipro's margins under pressure in the short term," Anand Rathi's Nayak said.
“The overall IT budget is not dramatically going up, but the shift to AI is going up significantly,” said Pallia. This implies that AI investments are eating into traditional tech budgets of software development and coding.
Tech Mahindra’s management, on the other hand, said it is making targeted investments towards AI.
“You can build 1,000 agents, but if you never use them, they're quite useless. I think we want to build agents where it's meaningful for us to build agents, rather than build agents to have some sort of account,” said Joshi. He added that the company was developing AI agents in customer service-related tasks.