Infosys, Wipro, TCS, Other IT Stocks Fall Over 2% As Accenture Narrows FY25 Growth Outlook
IT stocks like Wipro, TCS, HCL Tech, and Mahindra Tech may see a weak start due to Accenture's disappointing Q2 guidance; What should investors do now?
IT Stocks: Domestic IT services players started on a weak note on March 21, snapping a three-session winning streak, as global information technology player Accenture’s second quarter revenue guidance fell short of investor expectations.
Accenture is widely considered as a benchmark for Indian IT companies, offering insights into their likely performance. Accenture’s earnings report is a key indicator for the IT industry globally, including the Indian tech firms that rely heavily on services exports for revenue.
related stories
Shares of Accenture PLC crashed by 7 per cent on NASDAQ following its revised Q2 guidance report as investors huddled to sell the shares.
Reflecting this negative sentiment, American Depository Receipts (ADRs) for Infosys and Wipro dropped over 3 percent overnight. Domestic IT stocks might follow this negative trend in today’s trading session.
Accenture is often seen as a benchmark for Indian IT companies, offering insights into their potential performance. Accenture’s earnings report serves as a vital indicator for the global IT industry, including Indian tech firms that significantly depend on services exports for revenue.
At 9.20 am, the Nifty IT cracked over 2 percent as all its ten constituents traded with sharp cuts. The losses were led by Infosys, HCL Tech, Wipro and TCS that fell between 1.5 and 2.5 percent, respectively.
Trimming IN US Govt Spending And Rising Level Of Uncertainty
For FY25, Accenture projected an annual revenue growth between 5 percent and 7 percent, compared to its previous guidance range of 4 percent to 7 percent.
Accenture’s management also mentioned an increased level of uncertainty in recent weeks, particularly in public services, due to reviews and cuts in US government spending stemming from the Elon Musk-led DOGE (Department of Government Efficiency).
What Analysts Are Saying:
Hong Kong-based CLSA highlighted that while 8% of Accenture’s total revenue comes from U.S. public services, which are currently facing significant cutbacks, Indian IT players are not encountering the same challenges.
Citi, however, remains cautious about the Indian IT sector. Despite the depreciation of the rupee, domestic tech companies are expected to face difficulties in improving their margins. Nevertheless, Citi has maintained a positive outlook on HCL Technologies and Infosys in the large-cap space, and Mphasis in the mid-cap space.
Nuvama Institutional Equities, a domestic brokerage, acknowledged the sector’s long-term potential but cautioned that near-term uncertainty could continue to weigh on stocks and the sector as a whole.
In contrast, CLSA has reaffirmed its “outperform" rating for TCS, Infosys, Wipro, and Tech Mahindra, buoyed by continued improvements in Accenture’s BFSI (Banking, Financial Services, and Insurance) and CMT (Communications, Media, and Technology) verticals. CLSA remains optimistic about the Indian IT sector, unlike Citi.
Accenture’s Q2 Earnings at a Glance:
For the second quarter of fiscal 2025, Accenture reported a 3% decline in new bookings, totaling $20.9 billion. Of this, consulting bookings were $10.47 billion, while managed services bookings stood at $10.44 billion.
GAAP diluted earnings per share (EPS) rose 16% year-on-year, reaching $3.59, up from $3.10 in the first quarter of fiscal 2024. This also represents a 10% increase compared to adjusted EPS of $3.27 in the same quarter last year.
The company’s operating margin for the quarter was 16.7%, reflecting a 90 basis point year-on-year increase and a 167 basis point sequential improvement.
- Location :
- First Published: