Shares of major Indian IT firms Infosys and Wipro saw declines in the U.S. market, with their American Depositary Receipts (ADRs) dropping 3% each. This came after Accenture’s stock plunged 8% following its weaker-than-expected Q2 FY25 earnings report.
Accenture reported $15.8 billion in revenue, missing analyst estimates of $16.1 billion, and also cut its full-year revenue growth forecast. The company cited slower discretionary spending by clients and delays in large transformation deals as key reasons for the slowdown.
Why Accenture’s Earnings Affect Indian IT Stocks
Accenture is a leading global IT services provider and a key competitor to Indian IT giants like Infosys, Wipro, and TCS. Its quarterly performance provides valuable insights into demand trends for IT outsourcing and digital transformation services worldwide.
Business Model Relationship Between Accenture and Indian IT Firms
Similar Client Base: Accenture, Infosys, Wipro, and TCS cater to global clients across industries like BFSI (Banking, Financial Services, and Insurance), retail, healthcare, and manufacturing. A slowdown in Accenture’s revenue often indicates weaker demand for IT services, affecting the outlook for Indian IT firms.
Comparable Service Offerings: All these companies provide cloud computing, AI-driven automation, enterprise software implementation, and consulting services. When Accenture faces pricing pressure or deal delays, it signals potential challenges for Indian IT firms as well.
Spillover Effect on IT Spending: Many Fortune 500 companies work with multiple IT vendors. If Accenture’s clients are cutting back on IT budgets, it often leads to similar spending reductions on Infosys, Wipro, and TCS contracts.
Quarterly Earnings as a Leading Indicator: Accenture follows a different fiscal year (ending August 31) than Indian IT firms (ending March 31), making its results a leading indicator of demand trends ahead of Indian IT companies' earnings.
The weak results from Accenture suggest a prolonged slowdown in IT spending, particularly in consulting and large transformation projects. Indian IT companies may face:
- Delays in deal closures and lower client spending.
- Increased pricing pressure leading to margin compression.
- Potential downward revisions in revenue growth guidance.
With macroeconomic uncertainties persisting, investors will closely watch upcoming earnings reports from Infosys, Wipro, and TCS to gauge the extent of the impact.
Disclaimer
This article is for informational purposes only and should not be considered financial advice. Investors are advised to do their own research or consult with a financial professional before making any investment decisions. The author and SensexNifty.com are not responsible for any financial losses incurred based on this article.
