IT Services Update - Strong Momentum In Outsourcing Is A Positive For Indian Peers: PL Capital

PL Capital Report

Accenture Plc.’s commentary on outsourcing growth for FY25 indicates a positive bias over the consulting business. The management expects outsourcing to deliver low to mid-single digit growth in FY25, implies outsourcing to outpace the consolidated organic revenue guidance of 0-3% YoY.

The positive outlook on outsourcing is validated by the managed service growth (+7% YoY constant currency) performance and bookings (41% YoY) within outsourcing business in Q4 FY24.

Despite the improved trend within multiple pockets and broad-based growth across geographies, the management indicated that there is no notable change in the demand environment, while the “save-to investment” theme continued through the quarter.

Additionally, the management does not anticipate any meaningful improvement in IT budgets within Fortune 500 enterprises in FY25.

We believe the management has been conservative in building the outlook, especially for Consulting portfolio where the churn in discretionary spends is meaningful (hinting growth at the lowerband of the guidance).

The read across Indian IT peers remains positive, as the growth trend and strong bookings within outsourcing are encouraging and should replicate though FY25.

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