Accenture Q2 Outlook Rattles Indian IT Stocks: All You Need to Know

The second-quarter earnings commentary from Dublin-based IT services giant Accenture has sent shockwaves through Indian tech stocks. Accenture’s cautious guidance on IT service demand and cuts by the US federal government have raised concerns among Indian investors. 

On March 21, the BSE IT index opened nearly 2.5% lower. Individual stocks like Wipro, Infosys, and TCS fell as much as 3% in early trade. However, most stocks recovered by midday, except Wipro and Infosys. The BSE IT index also saw volatility in the previous session but ended in the green. Year-to-date, the index has declined over 16%. 

Red Flags in Accenture's Q2 Commentary

Accenture reported a 5% year-on-year (YoY) revenue increase to $16.7 billion in Q2 FY25. The company projected revenues between $16.9 billion and $17.5 billion, reflecting 3%–7% growth from the previous year. However, it narrowed the lower band of its full-year revenue growth outlook to 5%–7% in local currency, down from 4%–7% earlier. 

During the earnings call, CEO Julie Sweet highlighted two major concerns. First, Accenture Federal Services, which contributes 8% of global and 16% of Americas revenue, is facing uncertainty due to slowed federal procurement and a government review of contracts with the top 10 highest-paid consulting firms, including Accenture. 

These reviews and slowdowns follow orders from the Trump administration’s Elon Musk-led Department of Government Efficiency (DOGE) unit to review and significantly cut US government spending on consulting.  Sweet also pointed to heightened global economic and geopolitical uncertainty impacting business. 

Concerns for India’s IT Sector

Investors fear that India’s IT sector, already struggling with slowing discretionary spending in the US and other markets, will be further hit by these cuts. 

“Accenture’s top-end guidance (unchanged) assumes no recovery in discretionary spending. The results reinforce the cautious sentiment around IT services, where spending remains constrained, particularly for smaller deals,” said Motilal Oswal in a report on March 20. 

The report also noted that hopes for a revival in US banking, healthcare, and hi-tech spending due to rate cuts, a business-friendly administration, and pre-GenAI investments have not materialized. Delayed US rate cuts and rising geopolitical and tariff risks have added uncertainty for businesses in the US and Europe. 

“The company derives 8% of its revenue from federal agencies, which faces significant risk due to mandated cuts in consulting spend. While Indian IT firms have negligible exposure to the US government, the sector could still face near-term uncertainty,” said Nuvama Research.