IT stocks crash: Indian IT stocks came under heavy selling pressure after global technology services giant Accenture trimmed the upper end of its full-year revenue growth forecast and issued a weaker-than-expected outlook, raising concerns about demand trends across the information technology sector.
Nifty IT index tanked 6.5% as against a 1% fall in the benchmark Nifty 50.
All Nifty IT constituents were also in the red. Infosys was the top dragger, down 7.5%, followed by Mphasis, Tech Mahindra, Persistent Systems and TCS, all declining over 6% each. Meanwhile, HCL Tech, Coforge, LTM also shed over 5% each, and Wipro and L&T Tech were down 4% and 2%, respectively.
The negative sentiment spilled over from global technology stocks. On the New York Stock Exchange, the American Depository Receipts (ADRs) of Infosys and Wipro fell as much as 10% on Thursday following Accenture’s revised guidance. Shares of Cognizant lost over 10%, IBM declined over 5%, and Capgemini ended the session down 8.9%.
Accenture shares themselves plunged more than 17% after the company released its quarterly earnings and updated guidance, triggering a broad-based selloff across IT services and consulting companies worldwide.
Accenture cuts revenue growth forecast
Accenture now expects annual revenue growth of 3% to 4% in constant currency terms, compared with its earlier forecast of 3% to 5%.
Excluding the approximately 1% impact from its US federal business, the company expects revenue growth of 4% to 5%, lower than its previous outlook of 4% to 6%.
For the fourth quarter, Accenture projected revenue in the range of $17.75 billion to $18.4 billion, below analysts’ average estimate of $18.47 billion, according to data compiled by LSEG.
The consulting giant also disclosed that the conflict in the Middle East resulted in a $400 million impact on its regional business during the third quarter and warned that there could be “more impact in the fourth.”
Third-quarter new bookings declined about 2% year-on-year to $19.3 billion. Revenue rose 6% to $18.72 billion but fell short of analyst estimates of $18.75 billion.
Reuters reported that Accenture’s third-quarter revenue increased 6% but narrowly missed market expectations.
AI investments to ramp up
Despite the cautious outlook, Accenture highlighted continued strength in large transformation projects and announced plans to significantly increase investments through acquisitions.
The company said it intends to spend $9 billion on acquisitions this year, up sharply from $5 billion previously, as it strengthens capabilities in artificial intelligence, cloud computing and data services. These areas continue to attract client spending, particularly for projects focused on cost optimisation and business growth.
“Accenture delivered a strong third-quarter, with broad-based revenue growth, a 9% increase in EPS, and $8.2 billion returned to shareholders year-to-date. Demand for large-scale reinvention remains strong — 104 quarterly client bookings of $100 million or more year-to-date, up 13% — and we are seeing more large-scale AI transformation programs, while executing our strategy to capture new areas of growth. Our agreement to acquire a majority stake in Dragos and all of runZero and NetRise, leaders in OT Security, is the type of move that defines our strategy: it is expanding our addressable market, creating a new platformled growth opportunity, and is positioning Accenture at the center of one of the most critical cybersecurity challenges our clients face,” said CEO Julie Sweet.
The company also said it is witnessing an increase in large-scale AI transformation programmes, which continue to support business growth. Meanwhile, operating margin expanded by 20 basis points to 17% during the quarter.
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