Accenture Q1 signals stable demand but execution pressure for Indian IT firms

Accenture

Information technology (IT) services giant Accenture’s first-quarter results (Q1FY26) point to a stable demand environment but rising execution pressure for global and Indian IT services companies.

Clients are being careful with spending, putting money in fewer projects, with focus on AI-led transformation deals that take longer to generate revenue.

The quarter saw steady growth and strong deal bookings but management and analysts cautioned that discretionary spending remains constrained, margins are under pressure from ongoing investments, and AI-led demand is increasingly being embedded into core delivery rather than driving incremental, standalone growth.

On December 18, the world’s largest IT services company reported a strong Q1, with a revenue of $18.7 billion coming in at the top end of guidance and new bookings of $20.9 billion.

Accenture follows September-August financial year.

Management said advanced AI is now increasingly embedded across large deals, as clients move beyond pilots to scaled, end-to-end deployments.

“The key signal is not demand collapse but demand recalibration. Clients are still spending but they are prioritising fewer programmes, tighter scopes and clearer ROI, especially around AI-led transformation,” HFS chief executive officer Phil Fersht told Moneycontrol.

Brokerage firm Motilal Oswal Financial Services said Accenture’s Q1 suggests demand conditions remain broadly stable rather than improving materially.

While strong deal bookings point to healthy client engagement, the decision to retain full-year guidance indicates limited visibility on an acceleration in enterprise technology spending, the broker said in a research note.

Revenue growth in the quarter was supported by deal execution and favourable currency movements, with underlying demand trends largely in line with recent quarters.

“We expect AI services demand could begin to improve from mid-2026 as hardware-led AI capex intensity moderates and spending gradually shifts toward software, platforms, and services,” the brokerage said.

Brokerage firm Nomura said Accenture’s management commentary points to a macro environment that remains largely unchanged from the past year, with no visible catalyst for a sharp recovery in discretionary IT spending.

Growth continues to be led by the financial services vertical, while consulting demand remains relatively subdued compared with managed services, it said in note.

“We expect growth momentum in the financial services vertical to continue in the near-term for Indian IT services. However, a sharp growth revival hinges on macroeconomic improvement, particularly in the US,” Nomura said.

Accenture also said the first quarter would be the last period in which it reports standalone generative AI bookings and revenues, citing the increasing integration of AI across nearly all client engagements.

Fersht described the move as inevitable but cautioned that it alters how investors assess AI traction. “Visibility does not disappear, it simply shifts,” he said, adding investors would need to track AI impact through productivity improvements, revenue per employee, deal economics, and margin trends rather than standalone AI numbers.

Nomura echoed the view. AI-led demand is increasingly driving core services such as cloud migration, data modernisation, and platform transformation rather than existing as a separate revenue stream, the brokerage said.

For Indian IT companies such as TCS, Infosys, HCLTech, and Cognizant, analysts see Accenture’s quarter as resetting expectations ahead of the earnings season.

Growth is steady but incremental, deal pipelines remain healthy despite longer conversion cycles and AI is now central to delivery without materially lifting reported growth.

A stronger recovery, analysts caution, is likely to depend on an improvement in macro conditions rather than company-specific execution alone.