Wipro Limited (WIT) Cash Flow Statement

The OCF/NI ratio averaged above 1.2 over the period, but the 2026Q4 dip to 0.91 suggests that net income was not fully backed by cash generation, likely due to a large negative working capital swing of -$13.2B. Conversely, 2024Q4's ratio of 1.89 was boosted by a positive working capital inflow of $8.7B, indicating that earnings quality is heavily influenced by timing of receivables and payables. Investors should monitor whether the company can sustain cash conversion without relying on favorable working capital movements.

The FCF margin has been on a downward trend, with the latest quarter's 15.1% well below the 20.8% seen in 2025Q3. This decline is partly due to rising capital expenditures, which increased from $2.6B in 2025Q1 to $3.4B in 2027Q1, but also reflects softer operating cash flow. The gap between FCF and net income has narrowed, indicating that reported profits are increasingly consumed by capex and working capital needs. This trend warrants attention as it may signal reduced capacity for shareholder returns.

Despite the increase, capital intensity remains low, indicating that the business model does not require heavy fixed asset investment. However, the consistent rise in capex, from $2.6B to $3.4B over the period, may reflect investments in digital infrastructure or delivery capabilities. The depreciation and amortization charges have remained stable around $7-8B per quarter, which is roughly double the capex, implying that the company is not fully reinvesting its depreciation, potentially leading to an aging asset base. This could be a deliberate strategy to maximize free cash flow, but it may also indicate underinvestment.

The large swings in working capital, particularly the negative $13.2B in 2026Q4, suggest that the company's cash conversion cycle is not stable. This could be due to changes in client payment terms, project milestones, or inventory management. The positive working capital in 2025Q3 and 2024Q4 indicates that the company was able to collect receivables faster or delay payables, boosting cash flow. However, the recent negative swings may indicate deteriorating collection efficiency or increased receivables. Investors should monitor the trend in days sales outstanding and days payable outstanding to assess whether this volatility is a temporary phenomenon or a structural issue.

The data shows a significant shift in capital allocation: in 2026Q4 and 2025Q4, the company paid large dividends ($63.4B and $62.8B respectively), but in 2027Q1, it instead executed a massive buyback of $154.3B. This suggests a preference for returning cash via buybacks, which may be more tax-efficient for shareholders. Additionally, acquisition spending of $33.0B in 2027Q1 indicates a renewed M&A appetite. However, the sustainability of such large buybacks is questionable given the decelerating FCF, and investors should assess whether the company is over-leveraging its balance sheet to fund these activities.

The cumulative OCF/NI ratio of approximately 1.27 suggests that the company's earnings are of high quality, with cash flows exceeding reported profits. This is partly due to non-cash charges like D&A and SBC, which add back to cash flow. However, the recent quarters show a narrowing of this gap, with OCF/NI falling to 1.21 in 2027Q1 from 1.89 in 2024Q4. This could indicate that earnings quality is deteriorating, possibly due to increased working capital requirements or lower non-cash add-backs. Investors should monitor whether this trend continues, as it may signal a shift in the company's cash conversion ability.