Accenture’s recent fourth-quarter results are signaling a positive turn for the Indian information technology (IT) sector, according to analysts. While the pace of recovery remains uncertain, the company’s revenue growth outlook for the upcoming fiscal year (FY25) indicates reduced risks for growth among Indian IT firms.
Key Insights:
- Revenue Performance: Accenture reported a revenue of $16.41 billion for the June-August quarter of FY24, reflecting a 5% year-on-year increase in constant currency terms. This growth aligns with the company’s guidance of 2-6%.
- Segment Growth: Consulting revenue rose by 3% year-on-year, while managed services grew by 7%. Notably, financial services experienced a contraction of 2%, whereas healthcare and public services saw an impressive 11% growth.
- Strong Future Projections: Analysts from Nomura project a recovery in revenue growth for India’s large-cap IT companies, estimating a 7.9% year-on-year growth in FY26, compared to 3.6% in FY25. They recommend a ‘buy’ rating for companies like Infosys and Wipro.
Financial Highlights:
- Margins and New Bookings: Accenture’s adjusted EBIT margin stood at 15%, a slight increase from the previous year. New bookings reached $0.15 billion for the quarter, marking a 21% year-on-year rise.
- Guidance for FY25: Accenture cautiously raised its revenue growth forecast for FY25 to between 3-6% in constant currency terms, factoring in contributions from acquisitions and positive foreign exchange impacts.
Market Reaction
Following the results, the Nifty IT index rose by 2.8% on the National Stock Exchange, with major players like Coforge, Infosys, and Wipro leading the charge. This uptick in the stock market reflects a growing confidence in the sector’s recovery.
Generative AI Gains
Accenture also highlighted significant advancements in generative artificial intelligence (Gen-AI), securing $3 billion in deal bookings in FY24, with $1 billion occurring in Q4 alone. The company plans to expand its data and AI workforce from 57,000 to 80,000 by FY26, underscoring its commitment to this emerging technology.
Conclusion
As the IT landscape evolves, Accenture’s strong performance and strategic focus on generative AI position it well for future growth. Analysts remain cautiously optimistic, noting the potential for a more robust demand environment in the coming quarters.