Shares of IT stocks were reeling under selling pressure on Friday after global tech major Accenture lowered its revenue guidance for the current fiscal as uncertainty in the spending environment remained at a decadal high. The U.S.-based Accenture has cut its full-year revenue growth projection at 1-3% from 2-5% estimated earlier.
Reacting to the news, Accenture shares ended 9% lower in overnight trade on Wall Street, while the ADR (American Depository Receipt) shares of Infosys and Wipro fell up to 2.5%, indicating lower opening for Indian IT stocks at domestic bourses.
The BSE IT index declined nearly 2% in early trade today, led by index heavyweights HCL Technologies, Wipro, Infosys, Tata Consultancy Services (TCS), and Tech Mahindra, which fell up to 6% on the bourses. Meanwhile, the BSE Sensex was trading 141 points, or 0.19%, higher at 72,782, and the NSE Nifty was at 22,057, up by 46 points, or 0.21%.
HCL Technologies was the top laggard among individual stocks on the bourses, falling as much as 5.6% in the early trade so far. It was followed by Wipro and Infosys, sliding 4.2% and 3.7%, respectively. The share price of TCS, the country’s most valued IT stock, lost nearly 3% in the first hour of trade so far.
Among others, LTIMindtree, L&T Technology Services, MphasiS, Coforge, and Persistent Systems shares slid up to 5%.
IT stocks slumped today after Accenture released its financial results for the second quarter ended February 29, 2024, overnight. The GAAP net income for the quarter rose to $1.71 billion in Q2 FY24, compared with $1.55 billion in the same period last fiscal. Revenue was flat at $15.8 billion as compared to the second quarter of fiscal 2023, while operating income was $2.05 billion, compared to $1.94 billion in the year ago period. The operating margin improved to 13% compared to 12.3% for the second quarter last year.
Going ahead, Accenture expects revenues for Q3 FY24 to be in the range of $16.25 billion to $16.85 billion, or -1% to +3% in local currency. For fiscal 2024, the company now expects revenue growth to be in the range of 1% to 3% in local currency, compared to 2% to 5% previously.
“In an uncertain macro environment, we remain the trusted partner to our clients for reinvention with a record 39 clients with quarterly bookings of over $100 million. We also extended our early lead in generative AI with $1.1 billion in new bookings in the first half of the year,” says Julie Sweet, chair and CEO, Accenture.
New bookings for the quarter were $21.6 billion, with consulting bookings of $10.5 billion and managed services bookings of $11.1 billion.
JM Financial in a report says that Accenture’s revenue growth was expectedly soft as weakness in consulting sustained while managed services decelerated further. The company also saw incremental tightening in discretionary spending as clients’ new IT budget cycle commenced in January. “That drove a 2% cut in FY24 revenue growth guidance (from 2-5% to 1-3%). Cut in organic growth guidance was higher (-2% to 0% from 0-3%). Interestingly, guidance implies a steep 3.1-7.4% YoY growth in Q4 FY24,” it says in a report.
“Management, however, admitted that their visibility into Q4 is no different from any previous year, making the slope of recovery implied in the guide a bit optimistic, in our view. The 9% correction in the stock suggests the market is apprehensive too,” the brokerage says in the report released today.
On Indian IT companies, the brokerage house says most available guide for the calendar year 2024 already pointed at growth deceleration for global peers in CY24 versus CY23. “Accenture’s revised organic growth guidance (-2% to 0%) further underlines the trend. In contrast, the Street is expecting 3-9% higher growth in FY25 over FY24 for top 5 India IT Services players.”
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