IT shares in demand led by Infosys, as Accenture ups FY22 outlook by 700bps

Accenture reported strong revenue in Q1FY22 and upgraded its annual guidance by a massive 700bps as it continues to gain from demand for Cloud transformation.

Shares of information technologies (IT) companies were in demand with Nifty IT index gaining over a per cent in an otherwise weak market after Accenture reported strong results for the quarter ended November (Q1FY22) and also gave a strong FY22 outlook. Accenture follows July to August as financial year.

At 09:41 am; Nifty IT index, the sole gainer from the sectoral indices, was up 1.5 per cent, as compared to 0.63 per cent decline in the Nifty50 index.

Infosys, Wipro, MphasiS, HCL Technologies, Mindtree, Tech Mahindra, Larsen & Toubro Infotech and Tata Consultancy Services (TCS) from the index were up in the range of 1 per cent to 3 per cent on the National Stock Exchange (NSE). Persistent Systems, Sasken Technologies, Zensar Technologies, Mastek and Birlasoft, the non-index stocks were up between 2 per cent and 3 per cent.

Accenture reported strong revenue in Q1FY22 and upgraded its annual guidance by a massive 700bp as it continues to gain from demand for Cloud transformation. Its commentary on broad based demand (by region/verticals/deal size) and record high bookings (USD16.8b) should be seen as an indication of the stickiness in the demand environment for IT Services.

In Q1FY22, Accenture’s outsourcing revenues grew 21 per cent year on year (YoY) to US$6.57 billion while overall revenue (outsourcing+ consulting) grew 27 per cent YoY to US$14.97 billion. The company has raised overall revenue guidance for FY22 to 19 per cent to 22 per cent from 12 per cent to 15 per cent given earlier, ICICI Securities said in a note.

Accenture’s commentary reinforces our view that the demand environment continues to remain strong and is sustainable. The upgrade in its FY22 guidance and strong headcount addition provides visibility of the growth momentum in Indian IT Services. While supply-side challenges remain a point of concern, Accenture’s margin guidance implies stable to improving margin performance in FY23. We maintain our positive stance on the sector as we expect sustained growth with stable margin, Motilal Oswal Financial Services said in sector update.