TCS, Infosys, HCL Tech: IT Stocks Gain After Accenture’s Upbeat FY25 Guidance; Key Points
Shares of Indian IT majors Infosys, Wipro, Tech Mahindra, and Coforge rallied up to 4 per cent on Friday after their American peer Accenture beat Street estimates in its Q4 results and also increased its revenue guidance for FY25 to be in the range of 3-6 per cent.
A few analysts believe that the growth passing macro headwinds will appear from CY2, while outsourcing bookings bode well for the Indian IT sector as well.
The company recorded a revenue of $16.41 billion in the fourth quarter, compared with $15.99 billion for the fourth quarter of FY23, an increase of 3 per cent in USD. This was above the midpoint of the company’s guided range of $16.05-16.65 billion, or 2-6 per cent growth in local currency.
IT Sector Outlook
FY25 outlook improved as it is seeing early green shoots from client spending. Improved commentary is backed by strong order book momentum with $81.2 billion in bookings for FY24. With the conversion of large transformational deals from the past 18-24 months, it expects continued broad-based growth across all verticals, said Nirmal Bang Institutional Equities.
On the demand environment nothing much changed from Q3 to Q4FY24. FY25 outlook looks positive with client spending to pick up from Q2FY25 onwards. As one rate cut has already happened, and US elections will be over by December 24, clients will roll out fresh IT budgets with more certainty and resume spending. Pick up in organic revenue and consulting business backs this, it said.
“Accenture sounded optimistic in its commentary which augurs well for the global IT industry as well as the Indian IT services sector which will be announcing results from October 10 onwards. It has highlighted some positive pockets which are Gen AI, cloud, cybersecurity and digital transformation,” it Nirmal Bang added.
What Does It Mean For Investors?
“Accenture’s strong employee addition during the quarter indicates pick-up in demand, providing medium term growth visibility for the Indian IT services companies. Overall, strong deal bookings and higher growth guidance bodes well for the Indian IT companies,” it added, picking HCL Technologies and Mphasis as its top IT bets.
Motilal Oswal believes that the guidance, deal bookings, and the overall commentary have turned the corner, which bodes well for the sector. “This corroborates our views in our recent report in which we argue that client spend behavior is changing for the better, and we could see a return of modernization and discretionary spends going forward, albeit in some pockets, it said.
The brokerage had recently upgraded LTIMindtree, Persistent System and Coforge amid expectations of growth in pockets such as US banking, healthcare and manufacturing as well as a gradual recovery in data, ERP and mainframe modernization projects.
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