IT Sector Outlook: IT sector giant Accenture’s quarterly results have been spectacular. Accenture has raised its growth guidance for FY22 to 26.5 per cent from 25.5 per cent. Whereas in the previous quarter, the company had kept the growth guidance at 24-26 per cent. Despite the current volatility, rising growth guidance and stable margin outlook, it is clear that there is strong demand in the industry. Brokerage houses have said that this is also a very positive sign for the domestic IT industry. Brokerage houses have expressed confidence in stocks like Infosys, HCL and TCS.
Accenture Q3 revenue beats street estimates
Accenture posted revenue of $16.16 billion for the quarter ended May 2022 (Q3), beating the Street’s expectations. Buoyed by cloud and digital transformation, that number was a 22 percent increase compared to the $13.26 billion reported in the same quarter a year ago. Double digit growth rate augurs well for the Indian IT services industry.
Accenture follows the September-August fiscal year. The third quarter represents the period March-May 2022.
Accenture raises its revenue guidance
Although the company increased its annual revenue guidance, it expects a negative foreign exchange impact of 4.5 percent on its results. Accenture also said it expects full-year revenue to be in the range of 25.5 per cent to 26.5 per cent.
4QFY22 Unexpected guidance to add to macro concerns
Brokerage house Motilal Oswal in its note said: “While ACN revised its FY22 guidance by 100bp (at the midpoint), it guided to 20-24 per cent YoY CC growth in 4Q, down from 27 per cent in 3QFY22. The upper end of its guidance was below consensus estimates, which could raise concerns about the impact of the deteriorating macro-economic environment in the US and Europe. ,
Bright day for India’s IT sector
However, global brokerage house CLSA is seeing good signs for the Indian IT industry. The brokerage says that like Accenture, domestic IT companies can also show strong demand in the June quarter. The focus of investors is on margin management. The brokerage says the near-term outlook for the IT sector is strong and companies like Infosys, TCS and HCL may outperform. Their stocks may also show strength.
Motilal Oswal said the demand environment still remains favorable and the weak macro environment is yet to start impacting the growth in the sector. “While supply-side challenges remain a concern, with higher attrition and lower headcount additions, ACN’s margin guidance implies a stable margin performance in fiscal 2013. We continue to maintain our positive stance on this segment as we expect continued growth with stable margins. INFO, HCLT and TCS continue to be our preferred choice in Tier I IT sector,” the note mentioned.
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