Accenture Q1 results indicate continued weakness in IT outsourcing market

Bengaluru, 20 December: Accenture’s first quarter performance reflects continued weakness in the global IT outsourcing industry though there is a possibility of recovery towards the second half of next year.

Though discretionary spend is yet to come back, momentum in the deal bookings is indicative of enterprises’ focus on cost optimisation moves.

Brokerage firms are of the opinion that Indian IT firms are likely to echo similar sentiments as the earning season kicks up next week.

Management commentary (of Accenture) suggested ongoing weakness indiscretionary spend, which we expect to be echoed by its Indian IT peers as well. Onthe other hand, good deal booking in 1Q (up 10 per cent Q-o-Q) was driven by outsourcing. This, along with a positive outlook on pipeline, should provide some comfort onFY25 for (Indian) IT services companies,” Brokerage firm, Motilal Oswal wrote in a note.

On Tuesday, Accenture reported 1 per cent rise in revenue growth over the same period last year for the first quarter ended November, which was at the upper end of company guidance. Accenture follows September-August financial year cycle.

The company has maintained its FY24 revenue growth guidance of 2-5 per cent YoY on constant currency basis, suggesting a potentially improved second half next year.

Importantly, Accenture has made 10,000 net employee addition during the first quarter as the IT firm expects the revenue growth to exceed the growth of net employee addition in the coming years.

Usually, employee addition is considered as the lead indicator of growth. In April this year, Accenture had announced laying off 19,000 employees in order to cut cost.

Meanwhile, the company said implementation of generative AI solutions has increased across verticals with BFSI, public services, consumer, and utilities leading the pack.