Indian IT Sector Q1 FY26 Preview : Accenture Flags Client Caution, Slower M&A, And AI-Led Shifts

As Indian IT companies prepare to report Q1 FY26 results, global tech giants' Q3 FY25 earnings offer a preview of demand trends, geographic momentum, and the shifting nature of tech services.

Accenture reported $17.7 billion in revenues, up 7% in local currency and 8% in USD, supported by strong single-digit growth in Managed Services (+9%) and strong performance in the Americas (+9% YOY), and reasonable performance in EMEA and Asia at (+6%) and (+4%), respectively.

But the commentary accompanying the results is cautious and layered with signals relevant for Indian IT shareholders.

Bookings Dip, Outlook Conservative

New bookings came in at $19.7 billion, down 7% in local currency, led by softness in consulting. The company guided for just 1–5% revenue growth (Local Currency) in Q4 FY25, citing a challenging macro landscape.

Company sees weak orders and agreement cutbacks from US federal government, but as per management the revenue from those deals are immaterial.

Indian IT has reported strong deal wins in Q1FY26 and has seen stock correction in last 2 weeks, showing a positive outlook but pressure on growth still remains.

Geographic Split Matters

Revenue growth was broad-based but led by the Americas (+9%), followed by EMEA (+6%) and Asia Pacific (+4%). The softer growth in Asia may reflect delayed decision-making in discretionary tech spend something Indian IT firms with APAC exposure may witness.

Segmental View – BFSI & Healthcare Outperform

Financial Services (+13%) and Health & Public Service (+7%) were the top gainers, while Communications and Resources showed more muted growth (+5% and +4%, respectively). This mirrors strength seen in Indian IT exposure to BFSI clients globally going strong.

Strong Margins and EPS Beat

Operating margin improved to 16.8%, and EPS jumped 15% YoY to $3.49, aided by lower tax and SG&A costs.

Several caution flags raised by Accenture’s management could weigh on performance of Indian IT companies:

“There is significantly more uncertainty in 2025 compared to 2024, driven by geopolitical tensions, macro volatility, and client unpredictability.”

This signals potential project deferrals and cautious spending, especially in discretionary areas like consulting and digital transformation.

Additionally

M&A activity is slower, as Accenture notes it is not seeing the right targets in this market. This could hint at consolidation slowdown across IT services.

While Generative AI remains a strong theme, Accenture acknowledges demand is “strong but fluctuating”, as clients take varied approaches to implementation.

Management expects organic growth to return in Q4, suggesting a temporary slowdown in Q3, which could reflect in Indian peers’ outlook as well.

As per management, Gen AI is streamlining operations and reshaping how to approach client needs and transformation.

Accenture blows strong on Gen AI, clocking $1.5 billion in new bookings from AI this quarter. This reinforces the pivot of enterprise budgets toward AI use cases, automation, and efficiency, a space where Indian mid-tier firms like Mphasis and Persistent Systems have also accelerated investments.

Firms slow to adapt may lose wallet share to those with AI-specific offerings or strategic partnerships with firms.

For Indian IT, Q1 FY26 could see modest revenue growth, stable margins, and guarded commentary. While deal pipelines remain intact, conversion cycles may elongate, particularly in Europe and Asia.

Accenture’s tone also suggests that Indian IT vendors will need to compete aggressively in the AI and cost-efficiency space, and client retention will depend on agility.

Macro conditions haven’t improved meaningfully; markets remain uncertain.

Expect Indian IT firms to emphasise operational discipline, AI-led service innovation, and continued headcount rationalisation.

Accenture’s report sets the tone for a cautious approach yet opportunity in Q1 for Indian IT. Investors should watch for AI-led deal announcements, BFSI vertical performance, and commentary around discretionary tech spends in earnings calls over the next few weeks.