Accenture’s Muted Outlook Signals Deal Booking Slowdown For Indian IT Sector

Technology giant Accenture’s demand commentary flagging uncertainty in the global economic and geopolitical environment, indicates trouble for Indian IT industry. IT companies are likely to see a delay in new deal bookings and slowed ramp-up of current deal pipeline, according to analysts. 

Accenture, in its earnings report on Thursday, narrowed its guidance, expecting EPS between $12.55 and $12.79 per share, up from the previous range of $12.43 to $12.79. It now projects revenue growth of 5-7%, compared to the prior 4-7%. Accenture’s results are often viewed as a benchmark for Indian IT, which will report its fourth-quarter results next month.

“The uncertainty highlighted by Accenture, results in longer decision making cycles, which will impact deal bookings and revenue conversion. Similarly, Indian IT companies in the short term will face uncertainty from clients, resulting in longer time to sign deals. Even the current deals will see a slowed ramp-up,” said Piyush Pandey, Lead Analyst at Centrum India. 

Accenture’s CEO Julie Sweet at the earnings call said that the company is seeing an elevated level of what was already significant uncertainty in the global economic and geopolitical environment. The company’s sales and revenue were also impacted by US president Donald Trump’s efficiency drive decision resulting in slowed procurement actions.

Pareekh Jain, CEO of Pareekh Consulting, notes, “The damp sentiment will have an impact on large transformation deals, which the industry was looking forward to. While the growth will sustain with small and cost cutting deals, the acceleration won’t happen, putting the sectoral revival expected this year on a backfoot.” 

However, for the Indian IT industry, US federal government spending cuts wouldn't have a major impact, as the majority of Indian IT companies do not work with the US federal government.

Accenture’s consulting hasn't picked up significantly as it was expected to, and this indicates that the transformation deals will not happen as much, he adds. The company’s new consulting bookings in the recent second quarter results stood at $10.47 billion, in comparison to $9.2 billion recorded in the first quarter. 

However, the pick-up seen in Accenture’s Generative AI deal bookings is encouraging, analysts said. The company’s bookings in Gen AI contributed $1.4 billion, 7% of the company’s total bookings. CEO Sweet also flagged in the earnings call that the adoption of Gen AI is increasing among the clients. The Gen AI affiliated deals might become the area of growth, and presents a good opportunity for Indian IT companies as well, analysts said.