Accenture’s recent downward revision of its annual revenue growth forecast and cautious fourth-quarter guidance have sent ripples through the Indian IT sector, causing major IT stocks and the Nifty IT index to experience significant declines amid concerns over discretionary spending and deal cycles.
Illustration: Dado Ruvic/Reuters
Key Points
- Accenture narrowed its annual revenue growth forecast and issued weaker-than-expected fourth-quarter guidance, leading to a significant downturn in Indian IT stocks.
- Major Indian IT firms like Infosys, TCS, Mphasis, and Tech Mahindra saw their shares fall by 7-9 per cent, with the Nifty IT index tumbling 6.4 per cent.
- The demand environment remains mixed, with strong AI-led transformation demand partially offset by weak discretionary spending and elongated decision cycles.
- Analysts expect a gradual recovery for Indian IT rather than a broad-based acceleration, with macro-led demand issues potentially continuing into H1FY27.
- Despite near-term challenges, AI, cybersecurity, and platform-led offerings are highlighted as areas of growing momentum for Accenture and potential drivers for Indian IT.
Shares of information technology (IT) companies were under pressure, falling up to 9 per cent on the National Stock Exchange (NSE) during Friday’s intraday deals.
The fall came after Accenture narrowed its annual revenue growth forecast and issued weaker-than-expected fourth-quarter guidance, despite steady quarterly earnings.
Back home, Infosys tanked 9 per cent and Mphasis slipped 8 per cent, while Tata Consultancy Services (TCS), Tech Mahindra and Persistent Systems plunged 7 per cent each. HCLTech, LTM, and Coforge were down 6 per cent each.
Share prices of TCS, Infosys, LTM and Wipro have hit their respective 52-week lows.
Nifty IT Index Performance
The Nifty IT index tumbled 6.4 per cent on the NSE in intraday deals to 26,634.50.
The IT index was quoting at its lowest level since April 21, 2023. Nifty IT index ended 3.6 per cent lower compared to 0.64 per cent decline in the Nifty 50.
Accenture’s Revised Guidance
Accenture has guided for 1-5 per cent growth in constant currency (CC) terms for Q4FY26E, and expects 0.5 per cent headwind from currency movements in Q4.
The company has lowered its FY26E guidance band for revenue growth from 3-5 per cent to 3-4 per cent year-on-year (Y-o-Y) in CC terms.
It was largely due to the West Asia conflict and two large deals slipping into FY27E (due to client-specific issues).
For FY26E, Accenture expects around +2 per cent tailwind from currency movements and 1 per cent headwind from its US business.
FY26E adjusted earnings before interest and taxes (Ebit) margin guidance came in at 15.8 per cent versus previous the guidance band of 15.7-15.9 per cent.
Demand Environment and Sectoral Impact
The Q3 commentary suggests the demand environment remains mixed, with strong artificial intelligence (AI)-led transformation demand offset by weak discretionary spending and elongated decision cycles.
For FY26, the management expects consulting growth in low single digits and managed services growth in mid-single digits.
There was a direct impact of around $100 million revenue miss in Q3FY26 from the West Asia business (all consulting type work).
The automotive vertical, which was already a challenged sector, according to Accenture, saw added pressure due to higher oil/gas prices.
owever, the company highlighted growing momentum in AI (100 new advanced AI projects added), cybersecurity and platform-led offerings, while acquisitions such as Dargos, runZero and NetRise expanded exposure to the $27 billion fast-growing cybersecurity market.
Outlook for Indian IT Services
For Indian IT services, the read-through remains largely unchanged — AI-led demand and large deal activity are supporting growth.
However, the broader recovery is still gradual rather than broad-based, analysts said.
Those at Nomura believe that the West Asia conflict is expected to have some effect on revenues and deal bookings in Q1FY27 for Indian IT majors.
“In our view, the indirect impacts can continue in Q2FY27 as it is not clear how quickly spending behaviour will normalise, particularly in challenged sectors like auto. We prefer Infosys (buy) and Cognizant (buy) in largecaps; Coforge (buy) in midcaps and eClerx (buy) in the smallcap IT segment,” wrote Abhishek Bhandari and Karan Nain of Nomura in a recent note.
Overall, Accenture’s commentary, according to analysts at Choice Institutional Equities, suggests that AI is becoming an increasingly meaningful demand driver. However, it remains insufficient to offset near-term weakness from discretionary spending pressures, elongated deal cycles and delayed large-program conversions.
The brokerage firm expects a gradual recovery trajectory for Indian IT rather than a broad-based acceleration in FY27.
Within Tier-1, their analysts prefer Infosys and Tech Mahindra. Among midcaps, Persistent Systems and Coforge are their preferred ideas.
“We remain watchful regarding the discretionary spend outlook in CY26E/FY27E.
“Accenture’s Q4FY26E growth guidance implies that macro-led demand issues for the Indian IT sector may continue in H1FY27 (April 2026-September 2026).
“Its major adverse impact, if any, would be on the growth estimates for FY27,” wrote analysts at Equirus Securities.
They added: “We continue to recommend selecting stocks that have decent growth visibility through a well-balanced portfolio on cost take-out and discretionary/AI-led transformational spend.
“We prefer Infosys and TechM among largecaps and Mphasis, eClerx and KPIT Tech among midcaps on a relative basis.”
