Accenture Q1 results signal steady outlook for Indian IT amid muted demand

Nomura said it prefers Infosys and Cognizant among large-cap IT services firms, Coforge in mid-caps and eClerx in small-caps.

Indian IT services companies are likely to see a steady operating environment in the near term, supported by resilience in financial services-led demand and improving outsourcing momentum, even as discretionary spending remains muted, brokerages said in a read-through of Accenture’s first-quarter FY26 results.

 

Accenture’s management commentary pointed to largely unchanged macro conditions but highlighted continued traction in managed services, strong order bookings and a gradual broadening of artificial intelligence (AI)-linked opportunities, factors that brokerages said offer a constructive, albeit cautious, outlook for Indian IT services firms.

 

Accenture reported revenue of $18.7 billion in Q1FY26, up 5 per cent year-on-year (Y-o-Y) in constant currency (CC) terms, near the top end of its guided range, according to Nomura. Organic growth stood at 4 per cent Y-o-Y. Consulting revenues rose 3 per cent Y-o-Y, while managed services revenue grew faster at 7 per cent Y-o-Y, reflecting continued traction in outsourcing-led deals. Growth among verticals was led by financial services, which expanded 12 per cent Y-o-Y in CC terms.

 

Guidance intact, margins steady

 

Nomura noted that Accenture’s adjusted earnings before interest and tax (Ebit) margin improved by 30 basis points (bps) Y-o-Y to 17 per cent, although reported margins declined due to business optimisation costs. The company maintained its FY26 revenue growth guidance at 1-5 per cent Y-o-Y in constant currency terms and adjusted Ebit margin guidance of 15.7-15.9 per cent.

 

Management also highlighted that currency movements are expected to provide a 2 per cent tailwind in FY26, while the US federal business could pose a 1 per cent headwind. Importantly for Indian IT companies, Accenture indicated that demand conditions remain largely unchanged from the previous year. Management said the macro environment continues to be similar to last fiscal year and that it does not see a catalyst for a meaningful revival in discretionary spending in the near term, Nomura added.

Outsourcing momentum builds

 

Order bookings rose 12 per cent Y-o-Y to $20.9 billion in the quarter, with a book-to-bill ratio of 1.1x. Consulting and managed services bookings increased 7 per cent and 17 per cent Y-o-Y, respectively, according to Nomura. The brokerage said the continued strength in outsourcing deals is a positive signal for IT services companies, including Indian players.

 

Motilal Oswal struck similar views, noting that Accenture’s overall bookings crossed $20 billion, reflecting improved momentum in outsourcing deals, even as discretionary demand remains unchanged. The brokerage said management reiterated that overall spending patterns are consistent with last year, with no visible macro catalyst yet.

AI shifts from experimentation to execution

 

On AI, Accenture reported GenAI deal wins of $2.2 billion in Q1FY26, up from $1.8 billion in the previous quarter, while GenAI revenue stood at $1.1 billion. Nomura noted that management clarified this figure includes only GenAI revenues and excludes other AI and data engineering work. Accenture also said it will stop disclosing AI-related metrics separately going forward, as AI is increasingly embedded across most client engagements.

 

Motilal Oswal pointed out that client conversations are shifting from experimentation to readiness, with increasing focus on data clean-up, platform modernisation and system security to enable AI deployment at scale. It added that over half of Accenture’s advanced AI engagements are now triggering data modernisation work, which is relevant for Indian IT firms with strong capabilities in cloud, data and platform services.

Constructive read-through for Indian IT

 

JM Financial described Accenture’s commentary as constructive for Indian IT services, highlighting the sizable digital core modernisation opportunity, followed by industry-specific solutioning and ongoing optimisation through managed services. It added that acceleration in Accenture’s managed services revenues, alongside improving pricing, supports a long runway of work for Indian IT companies.

 

Nomura also highlighted that ecosystem partnerships remain critical, with Accenture deriving around 60 per cent of its revenues from work done with its top 10 ecosystem partners, underscoring the importance of alliances for growth in the IT services sector.

 

Moving forward, Nomura said revenue growth momentum in the financial services vertical is expected to continue in the near term for Indian IT services companies, though a sharper growth revival would hinge on broader macroeconomic improvement, particularly in the US. 

 

The brokerage said it prefers Infosys and Cognizant among large-cap IT services firms, Coforge in mid-caps and eClerx in small-caps. JM Financial added that while sector fundamentals remain constructive, recent gains in Indian IT stocks suggest that execution against expectations will be key going forward.

 

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