Amid rising economic uncertainty, technology major Accenture’s below estimate revenue guidance indicates a rocky road ahead for the Indian IT sector, which is due to post results next month.
The IT firm narrowed its revenue guidance for the current fiscal year to a range of 8–9 per cent from the earlier forecast of 8–10 per cent. The revenue for the fourth quarter is expected to be in the range of $15.75 billion to $16.35 billion, an increase of 2–6 per cent in local currency, which was below expectations.
Impact in revenue
The company said its revenues were impacted by lower-than-expected small-deal sales and results in communications, media, and high-tech industry groups for the quarter. Accenture follows a September-August financial year.
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Accenture is often considered a bellwether for the Indian IT sector, and its numbers and outlook provide an understanding of the performance of Indian IT companies. The Indian IT sector has been under pressure since the last two quarters amidst macro-economic headwinds. In the last quarter, companies have called for caution in certain industry verticals and have seen delays in decision-making and the cancellation of projects in some cases.
Grim outlook
The outlook for the upcoming first quarter of Indian IT looks rather grim. Analysts at ICICI Securities noted, “Given no expectation of recovery in August 2023 and in line with the April 2023 quarter, we believe there could be a downward revision of FY24 earnings estimates for Indian IT companies.”
Accenture called out weaknesses in the communication media and technology vertical, strategy, and consulting practice. ICICI Securities reduces its rating on Tech Mahindra, which derives 40 per cent of its revenue from communication, and Wipro, which derives 15 per cent of its revenue from consulting, it added.
Sumit Pokharna, Research Analyst-Vice President, Kotak Securities, said, “For Indian IT, weak discretionary spending will continue and growth will be led entirely by managed services. We remain cautious about the quarterly performance of select Indian IT service companies due to the slowdown in client-centric regions.”
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Published on June 23, 2023
