Wipro Receives Independent ESG Rating of 74 as Q3 Results Demonstrate Margin Expansion Despite Revenue Growth Challenges

Wipro Limited received an ESG rating of 74 from ESG Risk Assessments & Insights Limited on January 15, 2026, providing independent validation of the IT services major’s environmental, social, and governance performance based on publicly available information. The disclosure, made pursuant to SEBI listing obligations, came just one day before Wipro announced its third-quarter financial results for fiscal year 2026, which revealed significant margin expansion alongside modest revenue growth as the company navigates a cautious client spending environment while investing heavily in artificial intelligence capabilities.

The IT services company, with approximately 234,000 employees globally and headquartered in Bengaluru, informed stock exchanges including BSE, NSE, and NYSE about the ESG rating through a regulatory filing signed by M Sanaulla Khan, Company Secretary. Critically, Wipro clarified that it did not engage ESG Risk Assessments & Insights Limited for obtaining this rating, with the agency independently preparing the assessment based on company data available in the public domain—a methodology that enhances credibility among investors seeking unbiased sustainability evaluations.

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Growing Importance of ESG Ratings in Investment Decisions

ESG ratings have become increasingly important for companies as investors and stakeholders focus more intensely on sustainable business practices and corporate governance standards across global markets. The rating of 74 provides an independent assessment of Wipro’s performance across environmental, social, and governance parameters, offering institutional investors and asset managers quantifiable metrics to evaluate sustainability risks and opportunities that may materially impact long-term financial performance.

According to Wipro’s own research on ESG trends, ESG scores provided by third-party rating agencies define certain standards of a company’s operations and their impact on the environment, social business relationships, and transparency in governance. This helps socially conscious investors screen potential investments and avoid companies that could present financial risk due to ESG-unfriendly practices that may trigger regulatory penalties, reputational damage, or operational disruptions.

The environmental component evaluates a company’s energy consumption patterns, waste creation, natural resource conservation, treatment of flora and fauna, and pollution levels, assessing environmental risk, compliance with government regulations, and measures to mitigate those risks. Social factors examine labor practices, community relations, diversity and inclusion metrics, and stakeholder engagement. Governance encompasses board composition, executive compensation, shareholder rights, and transparency in financial reporting and decision-making processes.

ESG report and rating providers play a vital role in assessing companies with high degree of accuracy, serving as the backbone of the entire ESG value chain. There are numerous ESG data providers, varying by industry coverage, data capturing techniques, methodologies used, and rating scales employed, creating a fragmented landscape that companies must navigate while seeking to optimize their sustainability performance and disclosure strategies.

Q3 FY26 Financial Performance: Margin Excellence Amid Revenue Headwinds

Wipro’s third-quarter results, announced on January 16, 2026, demonstrated the company’s ability to expand profitability despite continued revenue growth challenges. Gross revenue for the quarter stood at ₹235.6 billion ($2.62 billion), marking a 3.8 percent sequential increase and 5.5 percent year-on-year growth in reported terms, reflecting both organic business development and contributions from recent acquisitions.

The IT Services segment revenue came in at US$2,635.4 million, reflecting 1.2 percent quarter-on-quarter growth and a marginal 0.2 percent year-on-year increase in reported dollar terms. In constant currency terms, which eliminate the impact of exchange rate fluctuations, IT Services segment revenue increased 1.4 percent sequentially but declined 1.2 percent year-on-year, highlighting the challenging demand environment facing the global technology services industry.

Operational performance improved notably during the quarter, with IT services operating margin expanding to 17.6 percent, representing a robust 0.9 percentage point sequential expansion and a 0.1 percentage point increase year-on-year. This marked one of the company’s strongest margin performances in recent years, demonstrating effective cost management and operational discipline despite integration expenses from acquisitions and investments in artificial intelligence platforms and capabilities.

However, consolidated net profit declined 6.6 percent year-on-year to ₹3,145 crore ($347.2 million) for the third quarter, even as revenue from operations rose, highlighting the impact of one-time expenses and integration costs. On a sequential basis, profit fell 3.6 percent from ₹3,262 crore in Q2 FY26, while revenue increased 3.8 percent, reflecting sustained demand but continued margin pressures from specific cost categories including newly implemented Indian labor codes.

AI Emerges as Strategic Differentiator and Growth Driver

CEO and Managing Director Srini Pallia emphasized that artificial intelligence has become a strategic imperative for Wipro and its clients, with the company’s Wipro Intelligence platform emerging as a meaningful differentiator in competitive deal processes. “In Q3, we delivered broad-based growth in line with our expectations. As AI becomes a strategic imperative, Wipro Intelligence is emerging as a differentiator and contributed to several wins this quarter,” Pallia stated in the earnings announcement.

He highlighted the growing adoption of AI-enabled platforms and solutions across the client base, with particular emphasis on scaling AI-led delivery through proprietary platforms including WINGS and WEGA. These platforms enable Wipro to deliver technology services more efficiently while providing clients with advanced capabilities for automating complex business processes, analyzing vast datasets, and generating actionable insights from unstructured information sources.

The company also expanded its innovation network across global locations during the quarter, positioning itself to capture emerging opportunities as enterprises accelerate digital transformation initiatives and seek to harness generative AI technologies for competitive advantage. The strategic bet on AI appears to be resonating in the market, as evidenced by several significant deal wins during the quarter where Wipro Intelligence capabilities played decisive roles in client selection processes.

Deal bookings provided further evidence of commercial momentum, with total bookings reaching $3.34 billion for the quarter, including large deals valued at $871 million. Notable engagements included a decade-long renewal with a global technology leader for AI-driven trust and safety operations, demonstrating client confidence in Wipro’s ability to deliver sustained value through advanced technological capabilities and domain expertise.

Margin Expansion Reflects Execution Rigor and Financial Discipline

Chief Financial Officer Aparna Iyer highlighted that margin expansion and strong cash generation reflected improved execution rigor across the organization. “Our IT services operating margins at 17.6% expanded both sequentially and on a year-on-year basis. This is our best margin performance in last few years,” Iyer stated, emphasizing the company’s disciplined approach to cost management and operational optimization.

The strong margin performance was achieved despite headwinds from integration costs associated with recent acquisitions, including the December 2025 completion of the Harman Connected Services acquisition, which contributed approximately one month of revenue during the quarter but also imposed integration-related expenses. Notably, Wipro did not implement wage hikes during the third quarter, which helped contain some cost pressures and contributed to margin stability.

Operating cash flow demonstrated the high quality of reported earnings, reaching 135 percent of net income in Q3—a metric closely watched by sophisticated investors as it indicates that profitability reflects actual cash generation rather than accounting adjustments or non-cash items. This robust cash conversion enables Wipro to invest in growth initiatives, pursue strategic acquisitions, and return capital to shareholders through dividends and potential buyback programs.

The company’s board declared an interim dividend of ₹6 per share, with January 27, 2026 fixed as the record date and payment scheduled on or before February 14, 2026. This dividend decision takes the total payout for fiscal year 2026 to $1.3 billion, demonstrating Wipro’s commitment to shareholder returns even while investing significantly in capability development and pursuing inorganic growth opportunities through acquisitions.

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Cautious Guidance Reflects Uncertain Demand Environment

Looking ahead, Wipro provided cautious revenue guidance for its IT Services segment in the range of $2,635 million to $2,688 million for the quarter ending March 31, 2026, translating to sequential constant currency growth guidance of 0 to 2.0 percent. This conservative outlook reflects continued uncertainty in client spending patterns, particularly for discretionary transformation projects, as enterprises navigate macroeconomic headwinds and geopolitical uncertainties affecting investment decisions.

The guidance incorporates expectations for contributions from recent acquisitions including Harman Connected Services, which should provide a full-quarter revenue impact in Q4, alongside organic growth from ramping large deals and expansion of existing client relationships. However, management remains cautious about near-term demand conditions given persistent concerns about global economic growth, potential recession risks in key markets, and ongoing adjustments as clients optimize technology spending amid budget pressures.

Analyst expectations for the fourth quarter vary, with conservative estimates from some brokerages projecting 0 to 2 percent revenue growth in constant currency terms, while more optimistic projections from other analysts anticipate 1.5 to 3.5 percent quarter-on-quarter growth including meaningful inorganic contributions. The divergence in forecasts reflects uncertainty about how quickly large deal total contract values translate into actual revenue recognition and whether discretionary spending will show signs of recovery as fiscal year 2027 approaches.

Labor Code Impact and Operational Challenges

One significant factor affecting Wipro’s profitability in recent quarters has been the implementation of new Indian labor codes effective November 2025. Jefferies estimates a one-time cost impact of 10 to 20 percent and a recurring increase of up to 5 percent in employee expenses due to these codes, which mandate enhanced benefits and protections for workers across various employment categories.

These regulatory changes represent structural cost increases that affect all Indian IT services providers, though the specific impact varies based on each company’s employee mix, compensation structures, and operational footprint. Wipro has worked to mitigate these costs through operational efficiencies, automation, and careful workforce planning, but the regulations nonetheless create margin headwinds that require sustained productivity improvements to offset over time.

The company continued to secure leadership positions in industry analyst reports during the quarter, being named a Leader in 12 analyst assessments including Gartner Magic Quadrants for Service Integration, Data Center Outsourcing, and Digital Workplace Services. These recognitions validate Wipro’s capabilities across core service lines and enhance competitive positioning in client evaluations, though they do not guarantee revenue growth in challenging demand environments.

ESG Integration into Business Strategy and Risk Management

Wipro’s receipt of the ESG rating coincides with broader industry recognition that sustainability considerations have moved from peripheral corporate social responsibility initiatives to core strategic and risk management imperatives. ESG disclosures are becoming mandatory for regulators, supervisors, and exchanges including frameworks from the Task Force on Climate-related Financial Disclosures (TCFD), Sustainability Accounting Standards Board (SASB), and World Economic Forum.

The company has developed comprehensive sustainability management capabilities, grounded in what it describes as a strong foundation of care, commitment, and humility. Wipro’s sustainability journey encompasses impact assessment and planning, zero-transition management to reduce natural resource consumption across extended value chains, responsible finance embedding data and risk management, sustainable technology deployment, and creation of diverse, equitable, and safe environments where employees and communities thrive.

Abraham Orden, Global Business Manager for Strategy and Risk at Wipro Cybersecurity and Risk Services, leads the company’s ESG Risk Advisory and Solutions practice, which leverages more than 20 years of governance, risk management, and compliance experience. This practice helps enterprises enhance responsible conduct and eliminate business drag as they respond to ESG regulations globally by applying learnings and best practices from landmark regulatory regimes including Sarbanes-Oxley and GDPR.

Competitive Positioning and Industry Context

Wipro’s Q3 performance must be understood in the context of broader industry trends affecting Indian IT services providers. Peers including Tata Consultancy Services and Infosys have reported similar pressures from cautious client spending, though specific results vary based on vertical market exposure, geographic mix, and large deal execution capabilities. The sector faces secular challenges including pricing pressure in traditional service lines, need for continuous capability refresh to address emerging technologies, and competition from both established multinational firms and emerging specialized providers.

The company’s stock performance reflects investor caution about near-term growth prospects, with shares declining 19.70 percent over the one-year period through mid-January 2026, though demonstrating positive 12.07 percent returns over a five-year timeframe. The recent rally of 3.7 percent ahead of Q3 earnings announcement indicated some investor optimism about potential positive surprises, though subsequent trading reflected mixed reactions to the actual results combining strong margins with modest revenue growth.

For the nine months ended December 31, 2025, Wipro reported consolidated revenue of ₹68,388 crore, up 2.7 percent from ₹66,584 crore in the corresponding period last year, with net profit for the nine-month period rising marginally to ₹9,744 crore compared with ₹9,630 crore a year ago. These figures indicate stable earnings despite short-term quarterly pressures, though growth rates remain below historical norms and investor expectations for technology services providers.

Strategic Priorities and Path Forward

Management commentary accompanying the results emphasized several strategic priorities that will shape Wipro’s trajectory through the remainder of fiscal year 2026 and into fiscal year 2027. These include accelerating monetization of large deal wins secured in recent quarters, scaling AI-led delivery platforms to improve productivity and enable new service offerings, expanding consulting capabilities particularly in banking and financial services verticals, and managing acquisition integration to realize expected synergies while minimizing disruption.

Demand conditions in key verticals including retail, energy, and manufacturing remain focal points for investor attention, as these sectors represent significant portions of Wipro’s revenue base and have experienced varied spending patterns in recent quarters. Pricing dynamics in large deals continue evolving, with clients seeking more aggressive terms while vendors attempt to maintain margins through efficiency improvements and value demonstration rather than pure price concessions.

The consulting business requires particular attention given its strategic importance for securing complex transformation engagements and establishing credibility with C-suite executives who control discretionary technology budgets. Updates on client-specific issues and large deal pipeline developments will be critical for assessing whether Wipro can accelerate revenue growth in coming quarters or whether current modest growth rates represent the new normal in a structurally changed demand environment.

Wipro’s ESG rating of 74, combined with Q3 results demonstrating margin discipline and AI capability development, presents a mixed but ultimately constructive picture of a major IT services provider navigating significant industry transitions while maintaining operational excellence and sustainability commitments that increasingly influence institutional investment decisions and client selection processes in an era where environmental, social, and governance performance has moved from optional reporting to core business imperative.

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By: Montel Kamau

Serrari Financial Analyst

20th January, 2026