Tech giant Accenture’s muted revenue growth and conservative outlook signals a continued downturn for the Indian IT industry. As discretionary spending remains cautious, demand recovery in the near term is not to be expected for the sector. 

Accenture in Q1 — the company follows September-August fiscal — reported year-on-year (y-o-y) growth of 1 per cent near the upper end of -2 to 2 per cent growth guidance range. For FY24, the company retained its guidance in the range of 2-5 per cent. 

Brokerage firm Kotak Institutional Equities noted, “Accenture has underperformed mid-point of initial revenue growth guidance five times in the past 17 years. The guidance of 2-5 per cent is among the weakest guidance in history, similar or weaker guidance occurred in recession years.” 

Accenture is considered a bellwether for the Indian IT sector, and its numbers and outlook provide an understanding of what performance can be expected. Kotak, in its note, mentions that the read-through for Indian IT is not to expect a quick recovery despite rate cut expectations

Seasonally-weak Q3

The report read, “Accenture’s results and outlook reaffirm our expectations of cautious near-term demand. While rate cuts can reduce macro uncertainty and spark spending in the future, haze around the near term continues. Significant recovery in discretionary spending, at least in H1CY24, appears a low-probability event. We expect 8-9 per cent industry growth in FY2025E.” 

The third quarter for the Indian IT industry is a seasonally-weak quarter as there are lesser working days due to furloughs. This, added with muted demand, will potentially dampen the growth momentum of the sector. 

However, the Generative AI wave might be a greener spot for the industry. Accenture, too, noted that demand for GenAI piqued, as it indicated $450-million (2.8 per cent of revenue) generative AI related sales in Q1FY24, a jump from $300 million during the whole of FY2023. 

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