Information Technology – Sector Update – Strong bookings, surprising Q4, stabilizing demand

Accenture’s Q4FY26 performance was stronger than expected, with revenue growth of 7% YoY in CC, above the guided range, while bookings grew 5% YoY CC to US$22.2bn, including robust managed services bookings of US$12.8bn. The strong deal momentum was supported by large-scale transformation and AI-led programs, faster mobilization of new contracts and an uptick in smaller deals, with 37 clients of >US$100mn bookings. Management indicated that the overall discretionary spending environment had not materially improved, suggesting that the Q4 outperformance was driven more by better deal conversion and execution indicating a stable to slightly improving environment. Accenture’s FY27 revenue growth guidance of 3–6% YoY CC, including ~2.5% inorganic contribution, was above street expectations of 1–5%, implying organic growth of ~0.5–3.5%. For Indian IT services, elevated booking growth and continued revenue conversion, particularly in outsourcing, provide a positive read-through on enterprise IT spending. Advances in frontier models are making AI investments increasingly affordable for enterprises, which should translate into broader AI-led revenue opportunities, while the ongoing Middle East crisis remains a near-term headwind. Despite these challenges, the combination of stronger deal wins, improving revenue conversion and an FY27 outlook above expectations suggests that FY27 could mark the trough, with a gradual recovery beginning to take shape in FY28.