The artificial intelligence (AI) sector is witnessing multi-fold growth globally and it’s no surprise that leading IT services company – Wipro is strengthening its presence in this sector. And,
Wipro’s acquisition of US-based Digital Transformation Solutions (DTS), a business unit of Harman, a Samsung company, for $ 375 million (about Rs 3,190 crore) is aimed at providing key end-to-end AI-powered engineering services to clients.
The US-based DTS had revenues of $ 314.5 million (about Rs 2,670 crore) for calendar year December 2024 and it implies that the above acquisition by Wipro has been done at about 1.19 times trailing revenues. The acquisition by Wipro was announced late on Thursday evening and the stock ended on Friday, lower by 0.5 % at Rs 248.6.
Wipro is expected to enter a multi-year agreement with Harman and Samsung.
Investors on Dalal Street will be watching how quickly Wipro will be able to derive synergies from its latest acquisition and accelerate growth in its revenues over the next few quarters.
However, brokerage houses fear that this M & A deal could hurt the operating profit margins of Wipro, going forward.
Wipro’s core consolidated operating profit margin shrank nearly 130 basis points q-o-q to 19.4% in the June 2025 quarter.
Wipro in July 2025, while declaring its June 2025 quarter results, had highlighted that it expects the revenues of IT services business in September 2025 quarter to be somewhat better – it had provided for a sequential guidance of (-)1.0% to 1.0% in constant currency terms. The Bangalore-based company had reported a 2 % quarter – on – quarter constant currency decline in its key IT services revenues at Rs 22,080 crore in the first quarter of FY26.
Investors have been worried on the growth prospects of Indian IT services companies, given the tariff regime of the Trump administration and its impact on IT spending of large US companies.
Wipro had also been on an acquisition spree in 2021 and 2022, and in April 2022, it had acquired US-based Rizing Intermediate Holding, a SAP consulting company, for a valuation $540 m or at about 2.8 times 2021 revenues.
Investors on Dalal Street
IT stocks have been laggards on Dalal Street with investors closely monitoring the uncertain growth outlook over the next few quarters. Infosys, ended Friday’s trade 0.6% lower at Rs 1,487.6, and it has risen from its 52-week low of Rs 1,307 that was reached on 7 April 2025.
HCL Tech also fell 1.8 % on Friday to Rs 1,466.5 on Friday, and has risen from its 52-week low of Rs 1,304 that was reached on 7 April 2025.
Valuations
Wipro trades at a P/E of nearly 19 times estimated consolidated FY26 earnings, excluding the latest acquisition.
HCL Tech trades at a P/E of nearly 24 times estimated consolidated FY26 earnings.
Clearly, IT stocks are still quite expensive, given the growth outlook over the next few quarters.
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Amriteshwar Mathur is a financial journalist with over 20 years of experience.
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