Accenture effect: TCS, Infosys, other IT stocks a mixed bag after Ireland-based firm posts strong results but trims guidance

Tata Consultancy Services (TCS), Infosys (INFY), Wipro, HCL Technologies (HCLTECH), Tech Mahindra (TECHM) and a bunch of other major Indian IT stocks gave up initial gains to finish the day on a mixed note on Friday, after Ireland-based consulting firm Accenture reported better-than-expected financial results but lowered its revenue guidance and announced layoffs. TCS and Infosys — two of the largest Indian IT companies — were the biggest boosts for the Nifty IT in the first half of the session that saw all of its 10 constituents firmly in the green, but a majority of scrips gave in to selling pressure in the second half.  

The IT index — which also includes stocks such as LTIMindtree Coforge and Mphasis — finished 0.2 per cent lower for the day.   

Here's where the sector stood at the end of the day: 

Analysts track the financial results of Accenture, which generates more than half its revenue from outside the US, to place their estimates for the Indian IT industry.

Here are your key takeaways from Accenture's financial results for its second quarter, which ended in February 2023: 

Accenture results

Accenture's topline as well as bottom-line exceeded Street estimates, with a 13 per cent year-on-year increase in bookings to a record $22.1 billion — reflecting strong demand, according to a company statement. 

The company reported a 5.1 per cent increase in revenue to $15.8 billion. According to Zee Business research, the company's quarterly revenue was estimated at $15.59 billion.

The IT consultancy, however, lowered its guidances for growth in revenue as well as earnings per share (EPS). 

Accenture guidance

The company trimmed its guidance for revenue growth in financial year 2022-23 to 8-10 per cent from 8-11 per cent. 

It also reduced its EPS guidance, to $10.84-11.05 from $11.20-$11.52.

Accenture layoffs

Accenture announced its decision to cut about 2.5 per cent of its workforce, or 19,000 jobs. Many analysts are reading this as the sign the worsening global economic outlook is affecting corporate spending on IT services. Out of Accenture's total employees, 40 per cent are in India. 

Accenture's layoffs add to the hundreds of thousands of job cuts in the tech sector over the past few months due dampening demand owing to sticky inflation and constantly rising interest rates.

What analysts make of Accenture results, guidance, layoffs

Morgan Stanley said the second quarter results of Accenture offer more positives than negatives for Indian IT vendors. However, the brokerage believes that any weakness in Indian IT companies' financial results for the quarter ending March 2023, and their guidance for the next year should be utilised as a buying opportunity. 

Morgan Stanley has LTIMindtree, Infosys and HCL Tech as its top largecap picks from the space. 

Here's what some of the other brokerages like from the Indian IT basket on Dalal Street: 

Read more on Accenture results, guidance, layoffs

Catch highlights of the March 24 session in the Indian share market here. For all other news related to business, politics, tech, sports and auto, visit Zeebiz.com.