Infosys, Wipro, TCS shares fall as Accenture forecasts first-quarter revenue below estimates

Accenture has guided a revenue growth of -2 to 2 percent in Q1FY24. On the company's full year's guidance, CEO Julie Sweet told analysts that Accenture is not assuming "that there's an improvement in the discretionary spend environment or the macro", and that the company would look to pivot to areas of growth.

The company saw its Q4 revenue numbers within its guided range but fell short of estimates as inflationary pressures continue to weigh on IT spending, with the company recording $15.99 billion in revenues in Q4FY23.

For the full year, Accenture’s revenue came in at $64.1 billion, up 4 percent year-on-year.

The US-based IT giant expects first-quarter revenue in the range of $15.85 billion to $16.45 billion, while analysts polled by LSEG forecast $16.43 billion.

Accenture also forecast fiscal 2024 adjusted earnings per share to be in the range of $11.97 to $12.32, below estimates of $12.45. The mid-point of its revenue growth forecast of 2 percent to 5 percent in local currency also fell short of estimates.

While Accenture's guidance is broadly in line with Motilal Oswal's expectation of a growth pickup for its Indian IT peers in FY25, its Q4 performance and Q1FY24 outlook would add to concerns over the near-term demand environment, the brokerage said.

Additionally, the deal booking in Q4 declined 3 percent quarter-on-quarter, as against the company guidance of flat growth, implying lower visibility on demand in the current environment.

"Accenture's India management highlighted CMT and North America as the key weak areas, which we see as negative for Tech Mahindra (c40 percent Comm. exposure)," Motilal said, adding Accenture’s commentary implies near-term weakness for the Indian IT companies.

Brokerage Emkay Global said that the revenue was at the mid-point of the guidance for the second consecutive quarter. It said the consensus FY25 growth estimates currently build in a gradual improvement in demand and, thus, carry risks if macro weakness persists.

"We believe recovery in technology spending is a matter of time but requires some stability returning in macro conditions. Our pecking order is INFO, HCLT, WPRO, LTIM, TECHM, and TCS among Tier-I companies," it noted.

Recently, Global investment bank Morgan Stanley turned positive on the IT pack and raised its price target for the entire pack, citing improving prospects for margin growth and expected recovery in earnings in FY25.

Strong outlook on FY25 revenue growth, improving margins, and double-digit EPS growth should keep valuations afloat, it said.

Accenture's numbers are seen as a bellwether for the IT sector in India, as it gives an indication of how Indian IT companies' numbers are likely to fare with the earnings season for the September quarter kicking off next month. Dalal Street investors will be closely tracking the second quarter results of Indian technology companies.