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Accenture’s Lower Bookings and Cautious Demand Outlook Spell More Trouble for Indian IT Firms

On a yearly basis, Accenture's revenue from North America rose 10% to $7.62 billion.

Indian IT companies are in for a long winter as their global peer Accenture’s second-quarter revenue guidance points to a cautious demand outlook. The company’s revenue guidance of $15.20 billion to $15.75 billion came in slightly below analysts’ expectations despite a solid first quarter (September-November).

Accenture’s revenue from North America was $7.62 billion, up 10% year-over-year. On the other hand, its revenue from Europe fell 0.5% YoY to $5.07 billion.

Its new bookings for September-November were $16.2 billion, down 3% from a year earlier. While the latest deals are reasonably priced, management expects margins to decline in the second quarter before improving later in the fiscal year.

According to foreign brokerage Nomura, Accenture’s guidance for currency growth in FY23 is 8-11%, indicating a slowdown in demand. As a result, it expects a downward revision to FY24 revenue growth estimates for Indian IT companies. Morgan Stanley also sees limited near-term re-rating triggers for Indian IT companies.

Meanwhile, Citi sees Infosys as the only “buy” in the sector, with management’s comments on IT budgets remaining the sticking point. “We remain cautious on IT stocks given the challenging macro environment,” Citi said.

Accenture’s revenue ranking leads major Indian IT companies and is often an indicator of performance expectations for Indian IT companies. Shares of Indian IT companies like TCS, Infosys and Wipro opened lower on December 19 following Accenture’s earnings release.

The Nifty IT index has fallen more than 20% this year amid fears of a recession in the US and Europe and valuations above long-term averages.

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