Accenture’s earnings: Mixed bag for Indian IT firms

accenture’s earnings: mixed bag for indian it firms

Accenture's revenue from managed services increased by 2% to $8.01 billion for the quarter.

IT services provider Accenture’s mixed Q3 performance, indicates that Indian IT companies with similar clientele and services will perform better in upcoming quarterly results starting July 11, according to analysts.

For instance, TCS, which is closer to Accenture’s size, and Infosys, which resembles its clientele, will perform better when compared to other large-tier Indian IT companies.

This is because Accenture’s managed services vertical performed well, which is also the forte of these Indian IT firms. However, Wipro may continue to suffer owing to its exposure to the consulting business.

Accenture’s revenue from managed services increased by 2% to $8.01 billion for the quarter.

Analysts said that mid-tier IT companies might bear the brunt from the onslaught of their larger peers as the race to grab large deals intensifies. This is because cost take-out deals generally go to larger companies, in a tough macroeconomic environment such as now.

“Accenture’s performance suggests potential positive outcomes for Indian IT companies who have similar profiles, but as far as what the companies told us the overall trend will likely will still be muted,” an IT analyst at a domestic firm said. On the bright side, analysts suggest these companies are strategically positioned due to their focus on managed services and investments in generative Artificial Intelligence (Gen AI). This means, Indian companies like TCS and Infosys are well placed as they are very similar to Accenture in terms of work, as both have trained their workforce on Gen AI.

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Accenture posted Q3 FY24 revenues of $16.5 billion, a slight 0.6% decrease year-on-year. This figure was slightly above the midpoint of Accenture’s guidance range of -1% to +3%. The company has narrowed its FY24 revenue growth guidance to 1.5-2.5% from the previous 1-3%.

Consulting revenue fell by 2.7% YoY to $8.5 billion, whereas managed services or outsourcing revenue increased by 1.8% YoY to $8 billion.  Further, despite some large and mid-tier Indian IT companies struggling to secure large deals, the performance of TCS and Infosys deal wins are expected to mirror Accenture’s, the analyst said.

“Accenture reported new bookings of  $21.1 billion, up 22% YoY, with a book-to-bill ratio of 1.3x. Consulting bookings rose by 3.9% YoY to $9.28 billion, while managed services bookings reached a record $11.78 billion, up 41.6% YoY,” Emkay Global said in its report.

The company secured over $900 million in new Gen AI bookings in Q3, totaling $2 billion for the first nine months of FY24, and achieved  $500 million in revenue year-to-date, it added.

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