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Accenture's recent financial performance has sparked optimism within the Indian IT services sector, suggesting a potential rebound in the coming year. The company, a global leader in consulting and technology services, concluded its fiscal year 2024 (FY24) with a modest 1% revenue growth, reaching $64.9 billion. While this growth rate is somewhat subdued, Accenture's optimistic outlook for FY25 and its bullish stance on generative artificial intelligence (Gen AI) have ignited hopes for a stronger second half of FY25 and a more robust FY26 for Indian IT players.
Accenture has revised its revenue growth forecast for FY25 upward, projecting a range of 3-6%. Although this prediction falls slightly short of Wall Street's expectations, it represents a notable improvement compared to the previous year. Moreover, the company's hiring plans and strategic investments in Gen AI further bolster the sentiment of a positive trajectory. Industry experts, such as Girish Pai from Bank of Baroda Capital, anticipate a significant surge in revenue growth for Indian IT companies in FY26, potentially reaching high single-digit or even low double-digit percentages in USD terms for leading players.
The emergence of Gen AI is a key driver of growth for Accenture and, consequently, for the Indian IT sector. Accenture's FY24 Gen AI order inflows reached $3 billion, translating to $900 million in revenue, a substantial increase from the previous year. The company is expecting continued growth in this area, with new Gen AI bookings hitting $1 billion in Q4 FY24. The potential of Gen AI has captured the attention of investors and analysts alike, as it signifies a transformative era for both Accenture and its clients. This technology is expected to drive significant growth over the next decade, similar to the impact of digital technology in recent years.
Accenture's hiring spree, with over 24,000 new employees added in Q4 alone, is a clear indication of its confidence in future growth. The company plans to continue hiring across various geographies, with a particular focus on India. While some experts attribute a portion of this headcount increase to acquisitions, the majority of it reflects Accenture's proactive stance towards preparing for an anticipated surge in demand. This investment in talent further reinforces the optimistic outlook for the Indian IT sector.
While Accenture's performance is seen as a benchmark for the Indian IT industry, it's important to note that there are certain nuances. Pure-play IT service companies, according to some analysts, may not experience immediate growth and may need another 6-12 months to recover. Conversely, end-to-end consulting firms like Accenture, with their multifaceted offerings, are poised for faster growth. The Indian IT companies, known primarily for their IT services, may not have the same level of expertise in areas like strategy, consulting, and operations, which are crucial for capitalizing on the Gen AI boom. Nevertheless, the overall sentiment remains positive, with experts predicting a gradual yet steady recovery for the Indian IT sector, driven by factors like increased investment in Gen AI, talent acquisition, and improving macroeconomic conditions.
Source: What Accenture’s Q4 performance signals for Indian IT companies