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Accenture Results Set Tone for Growth in the Coming Quarters
Accenture Results Set Tone for Growth in the Coming Quarters

June 27, 2022

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Indian IT companies ended the year on a positive note

In my last blog “Strong Demand Continues To Drive Growth In 4QFY22, Year Closes On A Double-Digit Growth” we saw that the top Indian IT companies reported strong fourth-quarter results ending the year on double-digit growth for FY22. Moreover, guidance from some of the companies highlighted expectations for double-digit growth for FY23.

Accenture Results further supports growth expectations for the segment

These expectations seem to have strengthened further after the recent quarter results released by Accenture on Friday, which reported a 27% cc revenue growth YoY which was ahead of guidance of its guided range of 22-26% with a strong deal pipeline of $16.9 billion (which was up 10% y-o-y). Further, the company downplayed any business impact of the current fears from macroeconomic risks to demand and emphasized that it expects both revenue growth and order booking to be strong in 4QFY22.

This positive sentiment sets the basis for the company’s expectations of raising FY22 CC revenue growth guidance from 24-26% to 25.5-26.5%, which includes a c.5% inorganic contribution. However, its revised reported US$ revenue growth guidance of 21-22% is under pressure due to higher cross-currency impact and attrition remained high at 20%, which reaffirms the industry-wide phenomena of talent shortage.

Expectations for revenue growth in 1QFY23

This trend sets a very positive tone for the 1QFY23 results of the Indian IT companies which are expected to start releasing their results next month. Notably, Indian IT companies together reported a strong deal pipeline of over US$15 billion during 4QFY22 (US$50+ billion for FY22). We expect revenues for 1QFY23 to witness growth 2%-3% q-o-q basis the steady demand environment which is also reflected in the optimistic deal pipeline numbers reported last quarter.

This expectation is further supported by the fact that Accenture reported overall strong bookings led by continued strength in both outsourcing and consulting bookings in 3QFY22. Modernization of technology stacks and requirement for digital transformation at speed is leading the growth for Accenture in their cloud, interactive, security, and Industry business segments.

Operating margins will be under pressure

Margins are expected to remain under pressure and will remain a key focus area to watch out for in the coming quarter as most Indian companies’ full/partial annual wage hikes will come into effect in the first quarter. 

Moreover, looking at the increasing attrition at Accenture, the uptrend in attrition is expected to be maintained this quarter as well, despite strong hiring levels.

Growth expectations will support profitability

However, sustained growth rates expected from the positive demand environment over the coming quarters will help in maintaining profitability. Overall, we maintain a positive outlook for large as well as mid-tier companies.

Read more details on how the operating matrix shifted across the Indian IT companies in our latest Quarterly Industry Review for 4QFY22. Stay tuned for more updates on Industry Performance at NASSCOM Community.

 


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Neha Jain
Senior Analyst

Neha Jain

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