Following Accenture's impressive Q1 earnings, which were fueled by AI demand, Indian IT companies are being closely examined. With strong bookings, revenue increased by 6% to $18.7 billion. Accenture stuck to its 2%–5% full-year revenue growth forecast.
Following Accenture's late Thursday release of its September–November quarter (Q1) results, which established a good trend for the IT industry, Indian IT companies, including Infosys, TCS, Tech Mahindra, Wipro, HCL Tech, and others, increased in early trading on Friday, December 19.
In today's session, Infosys increased 1.05% to ₹1643.90 per share, while L&T Technologies increased more than 1.5% to ₹4625.90 per share. Wipro, TCS, and Persistent Systems were also trading with increases ranging from 0.5% to 1%. Additionally, the Nifty IT index increased 1.08% from its previous closing price to reach the day's high of 39,054.35.
Accenture Q1 Outcomes
Accenture's shares increased by 2% in pre-market trading as a result of the company's better-than-expected first-quarter revenue, which was fueled by the growing demand for artificial intelligence solutions. In Q1 FY26, the company reported a 6% year-over-year increase in revenue to $18.7 billion, placing it at the upper end of its guidance range.
Despite conflicting macro data, regional revenue from the Americas gained 4% to $9.08 billion, EMEA increased 8% to $6.94 billion, and Asia Pacific increased 7% to $2.73 billion, indicating widespread demand. The gross margin increased little from 32.9% to 33.1% in the previous year.
With the exception of a 1% impact from U.S. government business, Accenture kept its full-year revenue growth forecast at 2%–5%. The guidance for organic revenue growth for FY26 stayed constant at 0.5%–3.5%.
The quarter supports Accenture's long-term transformation strategy, according to chair and CEO Julie Sweet: "Our USD 21 billion in new reservations makes me very happy. We continued to increase our market share while delivering revenue growth of 5% in local currency, which was at the top of our guided range. In order to assist customers in realizing value, we also expanded our ecosystem collaborations and bolstered our leadership in cutting-edge AI.
What does this signify for the Indian IT industry?
According to JM Financial, Accenture's remark emphasized consistent client priorities, with discretionary spending largely constant from the previous year and large-scale transformation efforts continuing. "Indian IT has a long runway of work thanks to the significant digital core modernization opportunity, industry-specific solutioning, and sustained optimization through managed services."
The firm went on to say that improved pricing trends and an increase in managed services revenue are especially positive signals for Indian IT peers. It pointed out that an increase in discretionary demand would provide an additional benefit.
JM Financial came to the conclusion that the risk-reward profile for the Indian IT industry is still favorable. Nonetheless, it noted that the over 9% increase in Indian IT equities over the past two months indicates that some of the optimism has already been priced in, making short-term performance against growing expectations more crucial than ever.
AI-driven momentum
The AI-driven division of Accenture saw remarkable growth. While advanced AI bookings increased 76% year over year to USD 2.2 billion, GenAI accounted for 11% of new bookings and 6% of total revenue. For the first time, advanced AI income surpassed the billion-dollar threshold, more than doubling to USD 1.1 billion. The total amount of new reservations increased by 10% in local currency to USD 20.94 billion, highlighting significant corporate investment in automation, cloud modernization, and AI-driven reinvention.
However, as U.S. federal agencies continue to reduce expenses and reallocate funds, the company noted uneven demand from government and public sector clients. Additionally, management reaffirmed that overall demand is essentially constant from the previous year, with no macrotailwinds yet apparent, and that discretionary spending has not improved.
Accenture's performance would be interpreted by Indian IT services firms as a mixed signal; while healthy bookings and strong AI demand encourage optimism, maintained revenue outlook and remarks regarding slow discretionary expenditure may temper expectations. In the upcoming quarterly results, investors will be watching to see if Indian companies can replicate Accenture's AI-driven deal wins, particularly as the industry attempts to restore growth following a sluggish 2024.
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