Wipro, India's third-biggest software firm, has seen rising wages hit shares, despite a 44% in quarterly profits.
Wipro chairman Azim Premji remains confident about the future
It offers IT, software, and call centre services to foreign clients and has worked for more than half of the companies on the Fortune 500 list.
The firm, which counts Cisco and Nortel among its clients, has benefited from Western firms looking to cut costs by outsourcing work to India.
But after saying wage rises would hurt margins, Wipro shares fell 5.6%.
Software service firms are now struggling to hold on to staff as overseas firms expand their operations in India, and there is a tussle for experienced workers.
As a result, salaries are climbing 15% a year - putting pressure on margins.
Wage increases would have an impact of about 1.5% on its operating margin in the July to September quarter, said Wipro's finance chief Suresh Senapaty.
But an upbeat Wipro chairman Azim Premji said: "The external environment remains buoyant.
"We see offshoring at the centre-stage of the IT strategy of global corporations."
Wipro said net profit rose to 6.14bn rupees ($131.5m; £72m) in April to June. Revenue rose 37% to 31.31bn rupees.
On Tuesday, Tata Consultancy Services, India's biggest software services exporter, reported a 33% profit rise to 8.63bn rupees.
And last week, Indian software giant Infosys reported a 50% increase in quarterly profit on the back of rising demand for its outsourcing services.