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What to expect and why it matters for Indian IT companies | Jobs Vox

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Indian IT giants such as Wipro, Infosis, Tata Consultancy Services, Tech Mahindra and HCL tech closely monitor Accenture’s earnings as the US-based IT company’s earnings are often seen as an indicator of the performance of the Indian IT sector.

US IT giant Accenture is all set to release its financial earnings report for the first quarter of financial year 2023. The IT services firm tracks the September-August financial year. According to research by Zack Equity, quarterly revenue for Accenture is estimated at $15.6 billion. This indicates a growth of 4.1 percent compared to the same period last year.

For earnings per share (EPS), the Zacks Consensus Estimate will be $2.91 per share, implying growth of 4.7 percent over the same period a year ago. For the most recent quarter, Accenture reported $2.60 earnings per share, beating EPS estimates by 1.90%. For the past three quarters as well, Accenture has beaten EPS estimates, but the margin is narrowing, according to the NISE data provided below.

Quarter EPS Beat estimates for
Q4 2022 2.6 1.09%
Q3 2022 2.9 2.77%
Q2 2022 2.54 7.35%
Q1 2022 2.78 5.79%

Although revenue is expected to grow, experts say the company could see an impact due to currency volatility, which was seen in the last quarter.

Impact of currency volatility on Accenture

In its fourth-quarter financial results, Accenture said it would be $15.20-$15.75 billion for the first quarter. The guidance, according to analysts around the world, was lower than estimates. The average analyst estimate was $16.07 billion, according to Refinitiv data.

The cut in Accenture’s guidance was largely due to a reduction in IT spending amid August’s unexpectedly hot inflation statistics and the effects of a stronger dollar.

Since Accenture’s third-quarter results, currency headwinds have worsened, with the U.S. dollar at a two-decade high against a basket of currencies and up nearly 17 percent so far in 2022 on Fed rate hikes US reserves and increased geopolitical concerns.

This has already affected firms with significant overseas operations, including Microsoft, Salesforce and IBM. With quarterly financial results for companies shrinking or below estimates, leading companies to cut costs with measures such as layoffs.

The profits of IT companies that convert foreign currencies into dollars are often adversely affected by a strong currency. For the first time since mid-2002, the dollar index, which compares the dollar’s value to a basket of six currencies including the yen, euro and sterling, hit a high of 111.79 in September. Currently, the dollar index is at 103,940.

Accenture also noted in its latest quarter earnings call that the forecast reflects an assumption of a negative foreign currency impact of about 8.5 percent.

Why Accenture earnings matter for India?

Indian IT giants such as Wipro, Infosis, Tata Consultancy Services, Tech Mahindra and HCL tech closely monitor Accenture’s quarterly results as the US-based IT company’s earnings are often seen as an indicator of the performance of the Indian IT sector. Accenture also outsources a lot of work from Indian IT companies; therefore, his results are always on the radar.

Accenture’s results on cloud adoption guidelines also open up additional opportunities for Indian IT companies and provide an environment for sustainable demand.

Meanwhile, global brokerage Nomura has forecast a slowdown in India’s IT sector in 2023. “While technology adoption continues to grow across industries, we expect a slowdown over the next 12 months compared to the past two years of high spending… Our revenue estimates for 2/24 are lower than the consensus numbers,” brokerage Nomura said in its latest report.

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