IT sector outlook, Motilal Oswal

Accenture Plc, one of the key peers of Indian IT services companies, reported revenue growth of 5% YoY constant currency in Q3, ahead of expectations.

Despite good Q3 growth, Accenture has lowered the upper end of its FY23 revenue growth guidance band by 100 basis point to 8-9% YoY CC, which we see as negative read-through for its Indian IT peers. Moreover, the management highlighted the impact on the demand environment from adverse macro, delays in small and discretionary deals, and a dip in deal pricing in few segments, all of which indicate a drag on near-term growth for our IT coverage.

While the impact is broad-based, North America has seen more impact on account of elevated caution from enterprises. Similarly, key verticals like banking, financial services and insurance and communication, media and technology are more impacted.

On the other hand, spending on large deals remains intact, especially on managed service deals (booking up 7% YoY CC). Accenture expects the momentum in managed services to continue in Q4 as well. We expect a negative near-term impact from the Accenture earnings commentary.

For report, https://www.bqprime.com/research-reports/it-sector-outlook-small-deals-impact-muted-near-term-outlook-negative-for-indian-it-says-motilal-oswal

Bloomberg