Brokerages have issued a mixed-to-cautious outlook on Indian IT services companies after Accenture reported its Q2FY25 results and updated full-year guidance. While the company’s performance showed resilience in the near term, most brokerages flagged concerns around discretionary spending, margin pressures, and macroeconomic uncertainty—factors that could weigh on FY26 growth for Indian IT firms.
Morgan Stanley noted that Accenture’s FY25 revenue outlook was in line with its estimates. However, the company’s commentary around rising macro uncertainty and client budgets remaining flat compared to last year signals potential headwinds for Indian IT companies going into FY26. Key takeaways for Morgan Stanley were:
- Positive: Accenture beat expectations in Q2 and raised the lower end of its FY25 growth guidance.
- Positive: Financial services performance improved.
- Negative: Margin expansion targets were lowered.
- Negative: Discretionary spending remains constrained.
HSBC offered a relatively steady view, stating that Accenture’s 2H guidance reflects an unchanged demand environment, with IT services outperforming consulting. The brokerage pointed out that there hasn’t been a significant deterioration in discretionary spending in recent weeks. The overall read-through for Indian IT is neutral to slightly positive, broadly in line with what was seen in December 2024.
Nomura struck a more cautious tone, highlighting that Accenture’s Q2 results ring warning bells for US federal contracts and macro concerns. While the lower end of the FY25 revenue guidance has been raised, Nomura pointed out that the figure includes over 3% inorganic growth, implying limited organic acceleration. Order bookings in consulting remained stable, and GenAI opportunity continues to build. Nomura expects growth to bottom out in FY25F for Indian IT and prefers Infosys and Cognizant (CTSH) in large-caps and Coforge in mid-caps.
Jefferies called Accenture’s Q2 revenue growth healthy, especially in North America and BFSI, which are key markets for Indian IT companies. However, it flagged weak deal bookings and rising pressure on discretionary and short-duration deals. The revised FY25 guidance of 5–7% implies 2–4% YoY constant currency growth in 2HFY25, which Jefferies believes could present downside risk to FY26 growth for Indian IT firms. Its preferred picks include Infosys and TCS in large-caps and Coforge in mid-caps.
While Accenture’s results offer near-term comfort, brokerages are divided on the medium-term implications for Indian IT. Most believe that stable deal activity and AI-led demand could offer support, but margin pressures and macro challenges remain key risks heading into FY26.
Disclaimer: This article is for informational purposes only and is not a recommendation to buy or sell any stock. Please consult a certified financial advisor before making investment decisions.
