Mint foundation | Accenture profit: Will it impact Indian IT companies?

What do Accenture’s results show?

India’s $260 billion IT services sector was cautiously optimistic that the current fiscal would be better than the previous one. Evidence of better times came from Accenture, which provided comfort with its numbers and guidance. FY25 revenue growth forecasts, hiring plans and an optimistic approach to the Generative Artificial Intelligence (GenAI) business have the industry hopeful for better FY25 and FY26. Accenture has ended FY24 (in line with the fiscal year of September -August) with revenue of $64.9 billion, up 1%, and increased its FY25 revenue growth forecast to 3-6%, almost double the previous forecast.

In which areas has there been growth?

Growth was positive across most industries, although banking, financial services and insurance (BFSI), high-tech and telecom declined. What excited the market was the AI ​​business. Accenture ended FY24 with $3 billion in GenAI orders and $900 million in revenue. This is a huge jump from GenAI’s order inflow of $300 million and revenue of $100 million in FY23. In Q4 alone, GenAI saw $1 billion in new deals. Additionally, proofs of concept (PoC) worth around $1 million each have now been translated into real-world deals averaging around $10 million. This pace is expected to pick up in FY25.

What will be the impact of the interest rate cut in the US?

While a revival in the AI ​​industry and a shift from PoC to larger deals was expected, the 50 basis point cut by the US Fed on September 19 is likely to increase spending in the BFSI segment. This represents 36% of the $260 billion business of Indian IT services companies. The rate cut may also result in higher spending by global companies, which will translate into improved prospects for technology services.

What will be the impact on Indian IT?

The Indian IT earnings season begins in October with HCLTech and Infosys. Accenture’s speech and the reduction of interest rates in the US will have an impact. IT stocks rose 4% to 6% on September 27 and have seen a good run in recent weeks amid expectations of improvement. However, in the case of Indian IT, even as the market improves, the gains will take a long time to materialize due to increasing competition from global capability centers (GCCs). Additionally, Accenture has a strong consulting business, an area where Indian IT services exporters are weak.

What can increase the earnings of an Indian IT professional?

Market watchers will be scanning deals in the AI ​​space to see if Indian vendors are currently pursuing more AI projects. In FY24, India’s largest services exporter TCS has signed over 200 AI deals, with a pipeline of AI deals worth $900 million. It has trained half of its 700,000 employees in artificial intelligence. Most other players don’t disclose AI deals, but projects need to go from PoC to deal to have an impact on profits. BFSI, high-tech and consumer sectors may contribute to the interest rate cut cycle that has started this month.