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Mint
17-07-2025
- Business
- Mint
Mint Explainer: Will FY26 be a washout year for the IT services industry?
Early results from the first quarter point to a challenging and even unpredictable roadmap ahead for the $280 billion IT business, driven by cautious client spending, tariff-related headwinds, geopolitics and more. While companies are putting up a brave front, these could cast a long shadow on this fiscal year. Mint breaks it down. What can we deduce from the earnings seasons so far? The latest earnings season has laid bare the shifting contours in the global IT services industry. IT services bellwether Tata Consultancy Services (TCS), missed revenue estimates in Q1FY26, echoing a broader caution among clients amid tariff-related uncertainty and deferred discretionary spending. Global technology services and consulting major, Accenture, posted a third quarter (March-May 2025) revenue of $17.7 billion. Despite beating revenue expectations, the Dublin, Ireland-headquartered company saw a second consecutive drop in new bookings in its third quarter. HCL Tech posted revenue growth of 1.34% sequentially to $3.55 billion for the June quarter, but missed profit estimates, while Tech Mahindra surprised with profit growth and an uptick in deal wins. Together, these results paint a picture of an industry in flux — caught between changing technology needs of clients led by artificial intelligence (AI), slow decision-making in consumer-facing, tariff- impacted sectors like retail and auto, vendor consolidation, clients opting to grow captive units or Global Capability Centers (GCCs), besides geopolitical headwinds. Companies are putting up a brave front, but these could cast a long shadow on this fiscal year. What are the top honchos saying? K. Krithivasan, chief executive officer and managing director, TCS, said continued global macroeconomic and geopolitical uncertainties caused a demand contraction. At Accenture's second quarter earnings call in June, Julie Sweet, CEO of Accenture, maintained that the company remains on track for strong growth, though the company's government business (accounting for 8% of its global revenue) has been impacted due to US federal policy changes. Accenture Federal Services contributes 8% to the company's global revenue ($64.9 billion in 2024). 'What we've seen in recent weeks is an elevated level of uncertainty. There's a global conversation around tariffs, not just in the Americas but in Europe as well," Sweet said. Despite a better-than-expected performance, Mohit Joshi, CEO of Tech Mahindra, said the macro picture is still hazy. "Tariff-impacted sectors are not conducive to discretionary spending. Overall market is volatile, and there's a slowdown in auto and manufacturing. Banking is steady and hi-tech is volatile. We do see recovery in the second half." C. Vijayakumar, CEO & managing director, HCLTech, said that the company's operating margin was impacted by lower utilization and additional GenAI and GTM (go to market) investments. Meanwhile, a Redditor (posting on Reddit, a social news aggregation and discussion platform) said, 'The next decade won't look like the last. Those who pivot to AI, develop deep domain expertise, and automate delivery models will thrive. Others might fade." What is the outlook for the IT services business? The near-term outlook remains cautious. TCS's CEO flagged intensified delays in discretionary spending and project starts, with clients deferring decisions until there's more clarity on US tariffs and fiscal policy. Accenture's restructuring around AI signals a pivot toward reinvention, but even it is grappling with slower deal closures. TCS revenue increased just 1.3% YoY, with four of six verticals declining. International revenue dipped 0.5%. Accenture's revenue grew 8% YoY, but bookings fell 6%, indicating future demand softness. Noida-based HCLTech's revenue was up 8% YoY, but net profit down 10%, reflecting margin pressure. And Tech Mahindra's revenue increased 3% YoY and profit surged 34%, signaling operational discipline and deal momentum. The broad consensus? Tech services growth will likely be muted in the short term, with FY26 guidance reflecting low single-digit expansion across most players. Is there stress in tariff-impacted sectors? Yes, and it's becoming more pronounced. The uncertainty around US tariffs—especially in consumer-facing businesses such as automobiles and retail and others, including manufacturing and communications—has led to deferred projects and cautious spending. BFSI, which is the largest vertical for most companies and accounts for around 35% of the industry revenue, remains steady. TCS saw year-on-year (YoY) contraction between 3% to 9.6% in various verticals, including consumer, healthcare, manufacturing, communication and media. While BFSI, technology, energy and utilities saw 1% to 2.8% growth in the same period. For Tech Mahindra, the manufacturing business declined 4% and technology, media and entertainment fell 3.3%. Among geographies, Europe grew 11.7% YoY, but Americas, which accounts for around half of its business, saw a 5.9% YoY revenue drop. For HCL Tech, much of the incremental revenue came from banks and financial institutions, which make up around 20% of the company's business. The company narrowed its revenue guidance for the full year. It now expects revenue growth between 3% and 5% in constant currency terms, from 2% to 5% earlier. Is Agentic AI becoming part of conversations? The market is fast shifting to agentic AI (AI systems designed to operate with a high degree of autonomy), but most IT services companies remain in pilot project mode, unable to convert proof of concepts into large projects. Accenture leads in this space. It has also set up a new division focused on AI called `reinvention services', which involves merging strategy consulting, technology, and operations into a single unit. For Accenture, GenAI bookings for the quarter hit $1.5 billion with revenues exceeding $700 million. In the first nine months of its fiscal year Accenture has secured $4.1 billion in GenAI business and generated $1.8 billion in revenue. Indian IT services players do not report AI revenue separately, despite claiming that AI is part of every deal. How are the new deal bookings? Deal momentum is mixed, with signs of stress in closures despite healthy pipelines. TCS won deals worth $9.4 billion, up from $8.3 billion in the year-ago period, but down from $12.2 billion q-on-q. Accenture won $19.7 billion new deals, down 6% y-o-y. HCLTech won $1.81 billion worth of new deals in the quarter, while Tech Mahindra saw a 44% jump in new deal wins YoY at $809 million in Q1. Will IT services survive multiple disruptions, from AI to tariffs? The IT services industry is at a crossroads. Tariff uncertainty and cautious client behaviour are dampening near-term growth, but AI—especially agentic AI—is emerging as a strategic lever. Accenture's bold restructuring may set the tone, but TCS, HCLTech, Wipro, Infosys and others must move beyond pilots to monetization. Deal pipelines remain healthy, but execution delays are the new norm. Reditor pointed out that clients are more interested in AI solutions rather than digital transformation, a pivot that Indian IT should make quickly. The winners will be those who can translate AI into measurable outcomes. Will GCCs spoil the IT services party? According to a Confederation of Indian Industry (CII) Global Capability Centre (GCC) report this week, India has established itself as the global hub for GCCs, hosting over 1,800 centres as of FY25. By 2030, India could have almost 5,000 GCCs with a direct employment of 4-5 million, the report noted. A ramp-up in GCCs will impact the work shipped to third-party providers, the IT services companies. Cognizant, for example, has raised concerns about potential risks stemming from GCCs operated by its clients in its 2024 annual report. Some IT services companies including Infosys, HCLTech, Wipro, Tech Mahindra are partnering with GCCs, helping them set up centers. But going forward, companies will have to compete not only with rival services providers but also with GCCs for business. A tough task in an already challenging business environment.
Time of India
24-06-2025
- Business
- Time of India
Accenture Q3 numbers show road's still bumpy for IT companies
Live Events Global IT major Accenture's financials for the third quarter of FY2025 announced on Friday suggested continued demand slowdown for the $280 billion Indian software outsourcing business amid weakened deal bookings. This was driven by an elevated level of uncertainty in calendar year 2025 (CY25) versus CY24, analysts and brokerage firms noted in their reports. Accenture follows a September to August fiscal Ireland-headquartered giant technology services company reported an 8% growth from a year-ago March-May quarter to $17.7 billion helped by the consulting business and an increase in financial services and health & public service Accenture's quarterly new bookings declined for the second consecutive quarter with a steeper drop at 6% (year-on-year) YoY compared to a fall of 3% in the previous saw the soft outsourcing deal wins – consulting down by 2.2% YoY and outsourcing deals weaker by 9.8% - as dampening for Indian IT players.'Bookings momentum slowed down, including in generative AI (GenAI)…Demand has not changed significantly, and the environment is not conducive for healthy deal wins,' said a Kotak Institutional Equities report in a note after the Accenture an incremental $2.15 billion to bookings YoY in 9MFY25 from GenAI, overall bookings still declined by $1.75 billion compared to headcount also fell by 10,337 from the previous quarter, the highest-ever quarterly drop for Accenture.'For the Indian counterpart, the slowdown in outsourcing bookings might further intensify conversion challenges on selective pockets, especially the tariff-induced verticals. While we expect BFS should continue its growth momentum in the subsequent quarters,' said brokerage firm Prabhudas Liladhar in its in Accenture plunged 6.8% on Friday. On Monday, the Indian BSE and NSE IT sector index, which accounts for share trading of IT companies, declined 1.5% each. Shares of top companies including Infosys and HCLTech fell over 2% while peers TCS and Wipro dropped more than 1% at the day's close on the firms Coforge , Persistent and KPIT Technologies also faced the brunt of the overall weaker January, the BSE IT index has lost over 13%. However, most analysts expect AI, banking, financial services and insurance (BFSI) and healthcare likely to be high-traction demand book-to-bill ratio remained healthy at 1.2x, which provides reasonable growth visibility over coming quarters, said a sectoral report by Nuvama (formerly Edelweiss) Institutional Equities. 'Over the medium-to-long term, we expect recovery in the macro environment to accelerate enterprise tech spending,' it fourth quarter revenue guidance was moderate at 1-5% growth to $17.0–$17.6 billion. Full year revenue guidance was narrowed at the lower end from earlier estimate of 5–7% to from 6–7% with a 0.5% negative impact of currency movement. Of this, organic growth is projected in the lower single digit at 3–4%.Notably, the quarter included two months—April and May—of heightened uncertainty following the US government's tariffs. This impacted decision making and discretionary spending further due to high-cost pressure on most healthy revenue growth was overshadowed by slightly lower outsourcing growth, slower overall deal wins, excessive headcount reduction (10,400), indicating lower demand going forward, as per an ICICI Securities report. It added there was no revision to the upper end through FY25 revenue guidance, a trend from the last two years.
Mint
21-06-2025
- Business
- Mint
Accenture share price crashes 7% after Q3 results as drop in new bookings overshadow revenue beat
Accenture share price plunged more than 11% on Friday after the multinational IT services company announced its third quarter results. Accenture share price hit an intraday low of $273.19 apiece, falling over 11% on Friday, June 20. However, Accenture shares closed the session 6.86% lower at $285.37 on NYSE. Accenture reported an 8% year-on-year (YoY) revenue growth to $17.7 billion in the March-May 2025 quarter, beating Wall Street estimates of $17.30 billion, driven by growing demand for the consulting giant's AI-driven services from enterprise customers. Accenture said its for the quarter ended May 2025 reflects a foreign-exchange impact of approximately positive 0.5%. Profit per share of $3.49 also beat estimates of $3.32. Accenture reported a gross margin for the quarter at 32.9% against 33.4% in the year-ago period. The Ireland-headquartered firm raised the lower band of its full-year revenue growth outlook to 6-7% in local currency from 5-7% earlier. The firm expects revenues in the range of $17 billion to $17.6 billion in Q4 FY25. Accenture's total cash balance at the end of Q3 was $9.6 billion. The company operates on a September-August fiscal calendar. However, Accenture reported a second straight drop in quarterly new bookings, which overshadowed the company's revenue beat and an increase in its annual forecasts, sending its shares down more than 6%. Bookings - which represent future revenue secured through contracts - fell 6% to $19.70 billion in the third quarter, worse than the 3% decline in the previous quarter. Accenture said 30 clients recorded quarterly bookings of greater than $100 million, compared with 32 in the previous quarter. Generative AI bookings totaled about $1.5 billion. The Americas contributed the largest share of the total revenue, amounting to $8.97 billion. Following this, the EMEA region (Europe, the Middle East and Africa) generated $6.23 billion, while the Asia-Pacific region accounted for $2.53 billion. The company increased its data and AI workforce to approximately 75,000 and looks to reach 80,000 by the end of FY26. Its global employee count at the end of the quarter stood at about 7,90,000. Accenture share price has dropped 10% in one month, and has declined 22% in the past six months. On a year-to-date (YTD) basis, Accenture stock price has declined 18%, while it is down nearly 7% in one year. However, Accenture shares have delivered 42% returns on five years. (With inputs from Agencies) Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Time of India
20-06-2025
- Business
- Time of India
Accenture Q3 earnings: Revenue rises 8% to $17.7 billion on Gen-AI momentum; Gen-AI revenue tops $700 million
Accenture on Friday reported an 8% year-on-year rise in revenue to $17.7 billion for the March-May quarter of FY25, supported by growing demand for AI-related services. The Ireland-headquartered IT services firm, which follows --a September-August fiscal calendar, also raised the lower end of its full--year revenue growth guidance to 6-7% in local currency from 5-7% earlier. The company's Q3 performance included a modest positive foreign exchange impact of 0.5%, it said in a statement. Accenture's gross margin for the quarter stood at 32.9%, compared with 33.4% in the same period last year. Accenture Chair and CEO Julie Sweet said, 'We continue to deliver on our strategy to be our clients' reinvention partner of choice and lead in Gen-AI,' highlighting that Gen-AI bookings for the quarter hit $1.5 billion, with revenues exceeding $700 million. Year-to-date, Accenture has secured $4.1 billion in Gen-AI bookings and generated $1.8 billion in revenue. According to the company, new bookings in Q3 totalled $19.7 billion, down 6% in US dollar terms. Of this, $9.08 billion came from consulting services and $10.62 billion from managed services. The Americas remained the largest contributor with $8.97 billion in revenue, followed by EMEA at $6.23 billion and Asia-Pacific at $2.53 billion. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Sanitize & Smooth Clothes Fast with Philips Steamer Philips Garment Steamers Learn More Undo Accenture said its global workforce stood at 7.9 lakh at the end of the quarter. Its data and AI employee count has reached around 75,000, and the firm aims to expand that to 80,000 by FY26. The company ended the quarter with a total cash balance of $9.6 billion and expects Q4 FY25 revenues in the range of $17 billion to $17.6 billion. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Mint
09-06-2025
- Business
- Mint
Advent to acquire significant minority stake in animal drug maker Felix Pharmaceuticals for $175 million
Private equity firm Advent International has signed a definitive agreement to invest $175 million (about ₹ 1,500 crore) for a significant minority stake in Felix Pharmaceuticals Pvt. Ltd, an Ireland-headquartered company focused on developing and manufacturing generic medicines for companion animals such as dogs, cats, and horses. This marks another bet by Advent in the growing healthcare space, this time tapping into the under-penetrated animal health generics segment, where branded drugs continue to dominate. Founded in 2015, Felix Pharma is among the fastest-growing companies in the animal health space, with 14 USFDA-approved products and several more in the pipeline. The company primarily supplies to distributors and other branded generics players, especially in the US, through private labelling. 'Felix has an opportunity to shape the companion animal health generics market. The industry is nascent, with less than 10% share held by generic players, providing a long-term growth opportunity,' said Pankaj Patwari, managing director at Advent, in a statement. 'As we scale in a fast-evolving market, we were looking for a partner who brings not just capital, but also deep operating expertise and the right mindset and networks to help us grow faster and stronger,' said Neeraj Agrawal, co-founder of Felix. 'Advent's strong track record in healthcare and pharma, and their close involvement in building strong businesses, gives us great confidence,' he added. Felix was co-founded by Neeraj Agrawal, a McKinsey alum, Sir Jonathan Symonds, chair of GSK, and Dr. Shumeet Banerji, former CEO of Booz Allen Hamilton. The company received its first USFDA approval in 2020, and now operates a dedicated R&D centre and a USFDA-approved manufacturing plant for animal health products. The facility includes dedicated oral solids and liquids capabilities tailored specifically for the veterinary generics market. 'Healthcare has been a long-standing focus for us, and strong parallels we see between success in human Gx [generics] globally and emerging opportunity in animal health Gx,' said Shweta Jalan, managing partner at Advent. 'Felix is well positioned to lead this space with its strong leadership, broad portfolio, and robust R&D and commercial capabilities,' she said. The deal comes amid a sharp rise in global demand for animal drugs, as pet ownership and spending on pet healthcare rise across geographies. Advent has been actively investing in Indian healthcare and financial services. In April 2024, it acquired a 12.1% stake in Apollo Healthco, a unit of Apollo Hospitals, for ₹ 2,475 crore. Last year, it invested $230 million in Svatantra Microfin along with Multiples PE, and exited Bharat Serums and Vaccines, selling it to Mankind Pharma for ₹ 13,630 crore.
