Accenture’s Q3 hints good times for IT cos

Orders from Generative AI space for Accenture have reached $2 bn in first 3 quarters and revenue received touched $500 mn. This shows that revenue conversion from GenAI is real and customers are investing in both cost and new initiative sides as far as GenAI is concerned. Another fear was GenAI would cut employee count, but Accenture’s rise in headcount shows it is not happening immediately - Pareekh Jain, founder, Pareekh Consulting, tells Bizz Buzz

Easing Off

• GenAI revenue likely to pick up for Indian IT cos
• Headcount addition expected H2/FY25
• Consulting space likely to see growth revival in Q2
• Consulting likely to improve in next quarter

Bengaluru: Indian IT firms are likely to post better earnings in the coming quarters as tepid demand environment is slowly bottoming out as indicated by the Q3 (March-May 2024) earnings of Accenture. Analysts are of the opinion that headcount addition, increase in deals coming from AI space and improved operating margin of Accenture in third quarter point towards good times for the Indian IT industry.

“Orders from generative AI space for Accenture have reached $2 billion in the first three quarters and revenue received touched $500 million. This shows that revenue conversion from GenAI is real and customers are investing in both cost and new initiative sides as far as GenAI is concerned. Another fear was GenAI would cut employee count, but Accenture’s rise in headcount shows it is not happening immediately,” Pareekh Jain, an IT outsourcing advisor and founder of Pareekh Consulting, told Bizz Buzz.

Accenture booked $2 billion in generative AI sales year-to-date and $500 million in revenue year-to-date. Despite a rise in GenAI sales, headcount of Accenture increased in the third quarter. Its headcount increased by 7,882, bringing its total employee count to 750,200. Interestingly, the company also experienced a rise in attrition, increasing to 14 per cent from the previous 13 per cent.

In FY24, Indian IT firms reduced their headcount after two years of record hiring. In fourth quarter ended March 2024, top five Indian IT companies reported a reduction of almost 70,000 employees. Analysts have raised concerns that rising penetration of GenAI could reduce dependence on manpower. However, Accenture’s rising headcount showed that this phenomenon is yet to play out.

The global IT major’s commentary on consulting space also raised hopes of revival in this space.

“Performance of consulting is likely to improve in next quarter. Usually, rise in consulting revenue is precursor to growth in total IT services space. In that sense, it is an encouraging sign,” Jain added.

Accenture reported a revenue of $16.5 billion for Q3, which was a decline of one per cent from year-ago period. The NYSE-listed IT major clocked a consulting revenue of $8.46 billion, a decrease of three per cent; while its managed services revenue for the quarter stood at $8.01 billion, an increase of two per cent over the same period of last year.

Accenture’s CEO Julie Sweet had said during analysts call that the company was expecting growth revival in the consulting space from next quarter. If that happens, many Indian firms including Wipro, & TCS would gain from such revival.