TCS, Infosys, Other IT Heavyweights See Shares Soar As Accenture Results Spur Recovery Hopes

IT services company Accenture declared its results for the May quarter. Accenture follows a September to August financial year.

What Happened: In its third quarter results, the company's revenue fell 1% from the previous year to $16.5 billion (₹1.38 lakh crore), with consulting revenue contributing $8.5 billion (₹71,062 crore) and managed services revenue of $8 billion (₹66,882 crore). 

Accenture's new bookings jumped 22% to $21.1 billion (around ₹1.76 lakh crore). New bookings in generative AI was at $900 million (₹7,524 crore), with a total of $2 billion (₹16,722 crore) bagged in the financial year so far. 

The service company reduced the full-year revenue outlook to the range of 1.5% to 2.5% from an earlier forecast of 1% to 3%. The company's performance is usually seen as a benchmark for the Indian IT industry, providing expectations for the tech company's earnings. 

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Brokerage Views: Morgan Stanley says there are few positive data points in Accenture's results such as strategy and consulting returning to growth and pickup in smaller deals. The brokerage sees this as another confirmation of bottoming out of growth rates. 

However, the signals of a return of discretionary spending are still elusive, the brokerage said. It believes the revenue growth recovery for Indian IT services companies is likely to be gradual. Overall, it’s marginally positive for sentiment towards Indian IT stocks, the brokerage added.  

Nuvama Institutional Equities maintained a positive stance on the IT sector and expects a sustainable strong demand environment to drive healthy earnings growth over the next three years. The Accenture management called out two positive reads across for Indian IT companies: consulting to return to growth in Q4 and bookings-to-revenue conversion
gradually improving.

The brokerage said the Indian IT Services companies have been reeling under the low deals-to-revenue conversion, and any signs of improvement would be positive. They added that the estimates for these companies is adeqautely rationalised and little downward risk from current levels.

Price Action: Shares of Indian IT companies have been up on Friday with Nifty IT index being up 2.54% at 35,824 points.

Shares of Infosys were up 1.93% at 1,544.70.

Shares of TCS were up 2.32% at 3,875.

Shares of HCLTech were up 2.52% at 1,479.80.

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