Accenture's muted guidance throws light on challenges for Indian IT sector

Accenture's 2-5 per cent growth guidance despite strong bookings highlights subdued IT demand, hitting Indian IT stocks already under pressure from tariffs and visa fees

Accenture’s guidance of 2-5 per cent growth for its next financial year indicates that the IT demand environment continues to remain subdued in the face of tariffs and macroeconomic uncertainties and there is still a long road before some signs of light at the end of the tunnel.

 

What makes it all the more concerning is it comes against the backdrop of the world’s largest IT services company reporting a 7 per cent growth in its fourth quarter ended August 31 and for the full year. The fact that it still projects muted revenue growth should ring alarm bells for the Indian IT sector.

 

Discretionary spends remain unchanged, as clients keep a tight grip over spends waiting for more clarity to emerge before going full throttle in newer technology areas.

 

“From a discretionary perspective, what we’ve assumed is at the top-end of the range, there’s no change in discretionary spend, while at the bottom of the range, it allows for deterioration,” chief executive officer Julie Sweet said in an earnings conference call on Friday.

 

The reason Accenture continues to remain upbeat is backed by its strong bookings of about $81 billion for the last financial year, that it believes positions it fairly well for this year. It is betting big on large transformative deals, that does bump up the revenue but also undercuts margins, because such deals are essentially one to drive down cost and improve efficiency.

 

“We did so against a macroeconomic backdrop that did not improve over FY24,” Sweet added.

 

Accenture stood out from its Indian peers when it comes to advanced AI-- a term it will use going ahead to cover generative AI (Gen AI), agentic AI, and physical AI. Bookings from that sector almost doubled to $5.9 billion for the last financial year, compared to a year earlier, while revenue tripled to $2.7 billion in the same comparable period. It said it was working on 6,000 projects and now has 77,000 AI and data professionals, up from 40,000 two years ago.

 

“We know that the gap between mind share and faster actual adoption is because the enterprise reinvention required to truly unlock the value of advanced AI is hard and has significant costs. There is a huge difference between how we’re all using AI in our individual lives that is incredibly easy and what it takes to use it in an enterprise. The opportunity for AI is at the intersection of business strategy and tech and org readiness. For most companies, the biggest gap between mind share and adoption is tech and org readiness,” cautioned Sweet. 

On steady path 

• Accenture revenue growth for FY26 projected between two and five per cent
• Total bookings for FY25 was about $80 billion
• Working on 6,000 advanced AI projects, which include Gen AI and agentic AI
• Revenue from such projects at about $2.7 billion, up from nothing two years ago