Infosys, Wipro, TCS, other IT stocks in focus after Accenture Q2 results. Details here

Infosys, Wipro, Tata Consultancy Services (TCS), among other Indian IT stocks will be in focus on Friday after the global IT giant Accenture reported its earnings for the second quarter ended February 2025.

The American Depository Receipts (ADR) of Indian IT stocks, Infosys and Wipro, plunged sharply overnight on the New York Stock Exchange (NYSE) after Accenture Q2 results.

Infosys ADR slipped 3.5% to $17.9 on the American stock exchange, while Wipro ADR declined 3.2% to $2.79 on the NYSE. Meanwhile, the US stock market ended lower, with the tech-heavy Nasdaq Composite closing 59.16 points, or 0.33%, lower at 17,691.63.

Accenture Q2 Results

Accenture reported its earnings for the second-quarter ended February, raising the lower end of its full-year revenue forecast and narrowed the range.

Accenture reported a 5% year-on-year (YoY) increase in revenue to $16.7 billion in Q2, in line with the company’s guided range of $16.2 billion to $16.8 billion. The company narrowed the lower band of its full-year revenue growth outlook to 5-7% in local currency, from 4-7% earlier.

The IT giant expects revenues in the range of $16.9 billion to $17.5 billion in the third quarter of FY25. The company’s gross margin for the quarter was 29.9%, against 30.9% in the year-ago period.

Total new bookings came in marginally below street expectation at $20.9 billion, with Consulting bookings at $10.5 billion and Managed Services at $10.4 billion.

Deal booking remained a tad soft which raises concerns on growth momentum sustainability, especially during periods of elevated uncertainty. The management indicated that the demand environment remains almost the same, with clients prioritizing reinvention or large-scale transformation programs, while discretionary spending continues to be constrained, particularly on smaller deals.

Impact on Indian IT stocks

Despite decent growth during the quarter and a 50 bps increase in FY25 guidance at the mid-point, uncertainty in federal spending remains a concern. Indian IT companies have low single-digit exposure to federal spending, which may keep stocks volatile in the near term, said analysts at Antique Stock broking.

Additionally, the risk of clients pausing spending due to rising global uncertainties over the past few weeks add to the headwinds. However, strong growth in Managed Services and bookings bode well for Indian IT and should help offset some of the macro concerns, they added.

The top picks in the IT sector by Antique Stock Coverage are HCL Technologies, Coforge, Mphasis, and Cyient.

According to Dipeshkumar Mehta, Senior Research Analyst at Emkay Global Financial Services, elevated macro uncertainties would put consensus estimates of Indian IT companies at risk, as it builds some improvement in discretionary spending.

“The Nifty IT Index has corrected ~15% CY25TD and underperformed broader markets by ~13%, due to increased macro uncertainties, potential earnings risks, and increased probability of another year of missing the anticipated growth acceleration. We believe valuation has priced-in growth moderation compared with earlier expectations for CY25, but material slowdown or recession risk persists,” said Mehta.

The pecking order in IT stock picks by Emkay Global is Infosys, TCS, HCL Technologies, Tech Mahindra, LTIMindtree, and Wipro in large caps.

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.