US tech major Accenture has given a below-market-estimate revenue guidance of 8–11 per cent due to reduced IT spending and rising inflation. This is a probable indication that the Indian IT firms may face headwinds and see the revenue growth momentum slowing down.

Accenture expects revenue growth of 8 to 11 per cent in local currency. For the quarter ended August 31, revenues increased by 15 per cent in $ terms and 22.4 per cent in local currency to $15.4 billion. The operating margins expanded by 10 basis points to 14.7 per cent.

Point of concern

Analysts say the below estimated revenue guidance for FY23 is a major point of concern and is an indication of a slowdown in the western economies. This is also an indication that Indian IT firms will face the brunt of macroeconomic headwinds.

Mitul Shah, Head of Research at Reliance Securities told businessline, “Lower FY23 guidance and margin pressure would lead to weaker commentary and more challenges for the IT sector going ahead.”

“Indian IT firms will follow the lead of Accenture. Indian IT firms will see margins remain under stress and slower revenue growth as large clients make IT spending cuts,” said Omkar Tanksale, Research Analyst, Axis Securities.

“This would continue pressure on Indian IT stocks for the near term and further valuation contraction from the current level despite the sharp stock price correction in YTD23,” Shah said. Recently, Goldman Sachs downgraded its ratings on TCS, Infosys, and Tech Mahindra to'sell', citing a sharp cut in dollar revenue growth forecast for the IT sector.

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