IT shares such as Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd (HCL Tech), Wipro Ltd and Tech Mahindra Ltd (TechM) are likely to react positively to Accenture's results, as its revenue growth at 9 per cent in Q1 beat the Street estimates. The Dublin-headquartered IT peer also upgraded its FY25 constant currency (CC) revenue growth guidance to 4–7 per cent from 3–6 per cent YoY earlier amid faster execution of the deals won earlier.
This augurs well for Indian IT services companies, said Nuvama Institutional Equities. Accenture's results are typically a leading indicator for Indian IT services, it said adding that the numbers reinforces its positive stance on Indian IT firms.
"We believe the guidance upgrade, broad-based growth across verticals, and the overall commentary augur well for the sector. Accenture's 1QFY25 results corroborate our view that the technology spending outlook continues to improve. While the initial phase of recovery in 1HFY25 was sluggish, we now see clear signs of an acceleration," MOFSL said.
MOFSL said the improvements appear to be expanding beyond US BFSI — which continues to strengthen—into additional industry verticals. While short-cycle deals remain elusive for larger providers and Accenture remains cautious in characterising the rebound in underlying client spending, the results and commentary lend confidence to an improving technology spend backdrop for Indian IT in 2025, it said.
TCS shares have fallen 3.5 per cent in the past five days. Infosys and HCL Tech declined up to 1.5 per cent while HCL Tech and Wipro shares gained up to 1.7 per cent during the same period.
"We have a Buy rating on Infosys, Wipro and Cognizant (not listed in India) in large-caps; and a Reduce rating on LTIMindtree, Mphasis and LTTS," Nomura India said.
BofA Securities said the Street did not expect high end of the revenue guidance to be raised early in the fiscal year. The foreign brokerage said it was also impressed with Consulting bookings of $9.2 billion, slightly ahead of its estimates.
Nuvama noted that Accenture continued to expect adjusted operating margin to improve by 10–30 basis points YoY in FY25, and highlighted that the overall demand environment remained the same as last quarter—with clients focusing on large-scale transformations projects.
Clients are also looking to invest more on data foundation and prioritising spending on AI, while there has been no material improvement in client spending, particularly on smaller deals.
"Headcount yet again grew 24,000 with the data and AI workforce now reaching ~69k, close to the FY25 target of 80,000. The management highlighted $242 million in investments across five acquisitions in Q1FY24," Nuvama said.