Clients in the IT industry are still cautious when making purchases

Accenture has lowered its revenue prediction for fiscal 2024 due to the unpredictability of the economy, suggesting that customers are still being frugal with their spending.

Accenture, a significant competitor of Indian IT services firms, revealed $15.8 billion in sales for the second quarter of FY24. “The business cut comparable FY24 projection to 1.0%-3.0% (vs. 2.0%-5.0% previous quarter) and offered poor 3Q revenue growth estimate of (1%)-3% YoY CC. Motilal Oswal Financial Services said in its analysis that “assuming 3Q growth near the top end, this implies a modest exit to FY24 of 6.0% YoY CC growth for Accenture despite a low base and inorganic support.”

“We discussed the cautious spending environment in the near term with our Indian IT peers, which should negatively impact their FY24 operational performance,” the statement said.

Beginning on April 12, Indian IT companies TCS will be the first to reveal their Q4 results next month. Emkay Global reports that Accenture’s management comments and guide reduction indicate that near-term demand is still softening as customers continue to be frugal with their expenditures. “Assuming the midpoint of Q3 forecast, the guidance suggests modest acceleration in revenue growth in Q4 compared to flat to low single-digit growth in H1. While certain Indian firms might see growth in FY25 due to a ramp-up of significant deal wins, our/consensus prediction of high single-digit growth for large caps is at risk due to ongoing weakness in discretionary expenditure.

It also said that the cautious behavior of customers in the short term should be reflected in Infosys and HCLTech’s FY25 revenue projection. Still, customers are making significant investments in generative AI. Accenture has seen a strong level of customer interest in generative AI, as seen by the $1.1 billion in total revenue generated in the first two quarters.

“Gen AI will have more ramifications, and clients’ conversations are shifting from proof of concept (POCs) to actual rollout and integration of AI into their core operations,” according to Motilal Oswal. Prior to this, ICRA said that it anticipates modest revenue growth for IT companies in FY25, at 3-5%, for the second year in a row. This is because of ongoing macroeconomic headwinds in important US and European markets, which cause corporates to reduce their discretionary IT spending.