IT services major Wipro has formally flagged the rapid adoption of artificial intelligence (AI) as a key business risk in its FY26 annual report, cautioning that flawed algorithms, embedded bias, regulatory uncertainty and unintended outcomes from AI systems could expose the company to legal, financial and reputational challenges. The Bengaluru-headquartered firm said the technology remains evolving and uncertain even as it is being scaled across client solutions and internal operations.

What Wipro said in its annual report

The company acknowledged that while it is increasingly deploying generative and autonomous AI technologies, success is not guaranteed. ‘The development, adoption, and use of AI technologies remain uncertain and evolving, and we may not be able to successfully develop, deploy, or scale AI-enabled solutions or realise the anticipated benefits,’ Wipro said in the report.

Any inability to innovate or integrate AI effectively, or any failure of such systems to perform as expected, could adversely affect Wipro's competitive position, operational efficiency and financial performance, the company warned.

Unintended outcomes and client disputes

Wipro noted that AI systems operating with limited human intervention raise the possibility of unintended outcomes and operational deficiencies. Such shortcomings could result in project delays, failure to meet contractual service obligations, disputes with clients and potential loss of business.

The company also highlighted that growing adoption of AI-driven automation and self-service tools by clients could erode demand for certain traditional IT services, putting pressure on pricing, margins and the overall service mix — a structural concern that cuts across the entire Indian IT services industry.

Rising legal and regulatory exposure

According to the company, AI adoption is sharpening legal and regulatory risks. Clients may demand stronger contractual safeguards including warranties, indemnities, audit rights and obligations on intellectual property ownership, data usage, cybersecurity, regulatory compliance and AI-generated outputs.

If AI-enabled solutions cause harm to clients, their customers or other third parties, Wipro said it could face regulatory scrutiny, litigation, financial liabilities, reputational damage and higher compliance costs.

Cyber threats and deepfake risk

Alongside AI-related concerns, Wipro underscored the growing threat posed by sophisticated cyberattacks. The company said malicious use of advanced AI models to create deepfakes and AI-powered social engineering attacks has significantly expanded the cyber threat landscape. Both Wipro and its third-party vendors now face heightened risks of data breaches, ransomware incidents and other cybersecurity attacks.

Geopolitics and trade headwinds

The company also cited geopolitical and macroeconomic uncertainties as significant challenges to future growth. Wipro said changing tariffs and trade policies, geopolitical tensions and conflicts in regions where it or its clients operate could directly or indirectly impact business growth. The disclosures come as Indian IT majors recalibrate growth guidance amid soft discretionary spending in key Western markets.