Accenture has been essentially the most outspoken about reporting income and gross sales from generative AI. Now, the service consulting agency can be highlighting how the federal government and the latest federal modifications have affected its income. This might have a big impression on the upcoming Indian IT outcomes.
In its newest earnings name, Accenture reported a income of $16.66 billion for Q2, marking a 5.8% decline from the earlier quarter, although nonetheless 5.4% increased than the identical interval final yr.
The outcomes come as India’s prime 5 IT companies put together to launch their financials subsequent month, with some struggling to keep up progress and others slipping into adverse territory in latest quarters.
Nonetheless, a key issue within the income slowdown stems from uncertainty in US authorities contracts, which account for a good portion of Accenture’s earnings. The overview of federal contracts by US President Donald Trump’s administration has additional added to the challenges.
“In latest weeks, we’ve seen a rise within the already vital uncertainty throughout the world financial and geopolitical surroundings, marking a shift from our first quarter FY25 earnings report in December,” mentioned Julie Candy, CEO at Accenture.
Candy additional acknowledged that the US authorities had directed federal businesses to overview contracts with the nation’s 10 largest consulting companies, together with Accenture Federal Companies, and determine these that aren’t mission-critical.
This comes at a time when Indian IT CEOs from HCLTech and Infosys are more and more involved about AI and are mulling whether or not they need to abandon their 30-year-old enterprise fashions.
What do Analysts Say?
Not everybody agrees that there shall be a direct impression on Indian IT. It is because they don’t function the identical means as Accenture does with the US authorities markets.
“Uncertainty out there is inflicting a delay in some decision-making as companies wait to get extra readability on the impression of the brand new insurance policies. Up to now, it seems that smaller IT and enterprise companies offers will really feel the consequences greater than bigger offers, which usually tend to be pushed by present price optimisation objectives,” Namratha Dharshan, chief enterprise chief at India Analysis, ISG, informed AIM.
She added that smaller offers, particularly ones within the $5-$9 million vary, bounced again in This fall 24. “It was one among a number of indicators that discretionary spending was beginning to open again up. The latest coverage bulletins may decelerate that progress once more, not simply within the industries instantly impacted by tariffs, but in addition in people who present companies to the industries most impacted,” she added.
Equally, DD Mishra, VP analyst at Gartner, informed AIM that there gained’t be a lot medium to long run impact, simply preliminary challenges, however requires vital concerns.
“The demand for operational effectivity and optimisation is more likely to rise, offering room for continued transformations. There shall be an impression of those modifications on the varied programs resulting in some alternatives that can be leveraged. General, IT firms have to be strategic and proactive in exploring the brand new alternatives, which may doubtlessly drive progress sooner or later,” Mishra mentioned.
Harish HV, managing director at ECube Funding Advisors, informed AIM the impression that these modifications had on Accenture just isn’t going to be the identical for Indian IT as they don’t work with the federal authorities.
Federal contracts contributed 8% of Accenture’s $64.9 billion income final yr, making the overview course of a vital improvement to watch. This isn’t true for Indian IT companies like TCS, Infosys, Wipro, or Tech Mahindra.
“Proper now, there may be plenty of flux. Going ahead, primarily based on what sort of modifications come, there could also be a necessity for extra IT options…So, it’s very troublesome to come back to a transparent conclusion whether or not it will trigger any injury to IT firms usually or IT firms from India particularly,” Harish mentioned.
“I feel it’s higher to attend for a few months to see how a lot of those translate into what sort of motion,” he added. “Indian IT firms have tailored. They began with Cobol within the historic ages however tailored to regardless of the present tech platform was that was getting used extensively.”
Regardless of the downturn, Accenture is pushing ahead with enlargement plans, allocating $3 billion for acquisitions—almost half of its projected progress for the fiscal yr.
Wanting forward, Accenture forecasts revenues between $16.9 billion and $17.5 billion for the subsequent quarter whereas sustaining its full-year progress steerage at 7%.
“Whereas we proceed to consider our work for federal shoppers is mission vital, we anticipate ongoing uncertainty as the federal government’s priorities evolve and these assessments unfold,” Candy mentioned in the course of the earnings name. “The brand new (Trump) administration goals to run the federal authorities extra effectively. Throughout this course of, many new procurement actions have slowed, which is negatively impacting our gross sales and income.”
Just like Harish, Viswanathan KS, impartial digital transformation advisor and former VP at Nasscom, informed AIM that it’s simply preliminary anxiousness inside firms due to the management change within the US, which isn’t going to make a long-lasting impression.
“Enterprise and enterprise within the US are resistant to the federal government modifications. There’s all the time anxiousness for the preliminary three to 4 months. That is simply that part,” Viswanathan mentioned.
“Whether or not it’s Accenture or Capgemini or Infosys or Wipro, no matter it’s, they’re all impacted partly by the federal government change, however largely by their means to regulate to the brand new mannequin,” he added. “The brand new mannequin just isn’t essentially when it comes to extra folks, extra when it comes to end result.”
“Alternatively, whether or not it’s WNS or EXL or Fractal or another pure play AI gamers, they don’t seem to be slowing down in any respect,” he mentioned, including that AI goes to play an enormous deal going ahead for IT companies and may also announce their generative AI income from it.
Regardless of all of the modifications, the Indian business nonetheless grew by 6%, as projected by Nasscom, which may also be due to the GCCs coming into the nation. “There is no such thing as a impression on GCCs,” he added. “We’re including $13 billion this yr as nicely, identical to final yr. $13 billion just isn’t a small quantity.”
Generative AI Positive factors Traction
Candy additionally acknowledged that belief and confidence of their distinctive strengths and capabilities are mirrored in 32 shoppers with quarterly bookings over $100 million. The corporate showcased sturdy progress in cloud, safety, and artistic enterprise divisions.
Accenture secured $1.4 billion in new generative AI bookings final quarter, comprising 6.7% of its whole order bookings of $20.9 billion.
Income from generative AI tasks reached $600 million in the identical interval, bringing the whole to $5.6 billion since September 2023.
As the primary IT firm to reveal direct income from generative AI, Accenture has set a benchmark. On the similar time, Indian IT giants—TCS, Infosys, HCL, Wipro, and Tech Mahindra—have but to disclose their AI income figures.
With earnings season approaching, analysts are warning of slower-than-expected progress in FY26, citing rising rates of interest, geopolitical instability, and potential new US tariffs.
For Indian IT companies, demonstrating tangible AI-driven income shall be essential. The stress is mounting for these firms to indicate they don’t seem to be simply investing in AI but in addition producing vital returns.