Accenture’s Q2 FY24 Commentary Points To Continued Pressure On Demand: Motilal Oswal

Motilal Oswal Report

Accenture Plc., a key peer of Indian IT services companies, reported Q2 FY24 revenues of $15.8 billion, flat YoY CC and down 2.6% QoQ, in line with company guidance and Bloomberg consensus. But the company gave weak Q3 revenue growth guidance of (1%)-3% YoY constant currency and lowered corresponding FY24 guidance to 1.0%-3.0% (versus 2.0%-5.0% last quarter), both of which missed Bloomberg consensus expectations.

Assuming Q3 growth near the top end, this implies a modest exit to FY24 of 6.0% YoY CC growth for Accenture despite a low base and inorganic support.

Management commentary continues to indicate weakness in discretionary spending, partially compensated by cost efficiency related spending. Our discussions with Indian IT peers echoed the cautious spending environment in the near term, which should drag down FY24 operational performance for them.

On the other hand, outsourcing-driven deal bookings remained robust, clocking the second highest bookings of $21.6 billion in Q2 despite the high year-ago base (down 2% YoY but up 17% QoQ).

We see continued weakness in communication, media and technology as an ongoing overhang on Tech Mahindra Ltd. (~40% comm. exposure).

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