IT Sector Resilience Amid Earnings Volatility: A Deep Dive into Infosys and Wipro

The IT sector has long been a cornerstone of India's economic engine, but 2025 has tested its mettle. With global macroeconomic headwinds-ranging from Trump's tariff threats to tepid client spending-investors are scrutinizing whether tech giants like Infosys and Wipro can weather the storm. Let's break it down:

Infosys: Growth vs. Margin Pressure

Infosys' Q4 FY2025 results were a mixed bag. Revenue rose 8% year-on-year to ₹40,925 crore, driven by strong demand in financial services and manufacturing, according to a Samco report. However, net profit tumbled 11.7% to ₹7,033 crore, a blow attributed to higher employee costs and a 2.01% sequential revenue dip, according to a SensexNifty analysis. The company's operating margin held at 21%, but its guidance for FY2026-0% to 3% revenue growth-sent shockwaves through the market, the SensexNifty analysis added.

Investor sentiment? Cautious. Despite a robust $4.1 billion free cash flow for FY2025, reported by Fortune India, Infosys' stock fell 0.2% post-earnings. Analysts like ICICI Securities upgraded the stock to "Buy" with a ₹1,759 target, citing innovation in AI and cloud, per Fortune India. Yet, the market's skepticism is palpable. As one Wall Street strategist put it, "Infosys is a cash cow, but its growth engine is sputtering."

Historically, the market has not rewarded Infosys around its recent earnings announcements. A backtest of its stock performance from 2022 to 2025 shows a cumulative event return of approximately -9.5% over 30 trading days post-earnings, with no statistically significant positive days, as noted in the SensexNifty analysis. This suggests that investors may need to temper expectations for near-term price action following earnings releases.

Wipro: Profit Surge, Revenue Stagnation

Wipro, on the other hand, delivered a profit bonanza. Net income jumped 25.9% to ₹3,569.6 crore, with operating margins expanding 1.1% year-on-year, per Fortune India. But revenue growth? A paltry 1.3% to ₹22,504.2 crore. The IT Services segment even contracted 1.2% quarter-on-quarter, the SensexNifty analysis noted. CEO Srini Pallia hailed "execution rigor" as the key to margin expansion, the Samco report said, but the numbers tell a different story: Wipro's stock plummeted 1% post-earnings, mirroring concerns about its ability to scale.

However, historical data reveals a contrasting narrative. A backtest of Wipro's earnings-related performance from 2022 to 2025 shows a cumulative event return of +4.8% over 30 trading days post-earnings. By day 24–30, the impact becomes "significantly positive," with a win rate rising to 77%, according to the SensexNifty analysis. This suggests that while short-term volatility may occur, earnings news has historically provided a persistent positive drift for Wipro.

Valuation Metrics: Who's the Better Bet?

Here's where the rubber meets the road. Infosys trades at a TTM P/E of 24.36, above its 10-year average of 22.77, per Fortune India, while Wipro's P/E sits at 18.06, as noted by SensexNifty. At first glance, Wipro looks cheaper. But context matters. Infosys' $3.8 billion in Q1 FY2026 large-deal TCV and 20.8% operating margins, highlighted in the Samco report, suggest it's better positioned for long-term resilience. Meanwhile, Wipro's valuation discount reflects lingering doubts about its growth trajectory.

The Bigger Picture: Sector-Wide Challenges

Both stocks are caught in a crossfire of macroeconomic noise. Trump's tariff threats have rattled global tech demand, while clients are delaying spending amid AI hype fatigue. Yet, the sector's fundamentals remain intact. Infosys' focus on AI-driven solutions and Wipro's margin discipline are positives. However, TCS' outperformance-thanks to $3.8 billion in AI/cloud deals, as noted by SensexNifty-highlights the need for aggressive innovation.

Final Take

For investors, the key is balance. Infosys offers growth potential but at a premium valuation. Wipro's lower P/E is tempting, but its revenue stagnation is a red flag. As the sector navigates volatility, watch for catalysts: Infosys' AI bets and Wipro's execution on large deals could sway sentiment. In the words of a seasoned analyst, "This isn't the time to chase momentum-it's time to pick your spots."