Accenture reports deceleration in outsourcing new bookings; LTM attrition at multi-year high

News: Accenture reported its Q3 numbers (August ending company). The overall revenue for the company grew 21.8% YoY to US$16.1 billion (bn) wherein outsourcing business , (proxy to Indian IT companies, 44% of revenue mix) grew 18.7% YoY to US$7.1 bn while consulting business grew 24.4% YoY to US$9.0 bn. New bookings (net new order book) were at US$7.8 bn for the quarter for outsourcing business, grew 6.7% YoY. The company’s net adds (billable) were at 10,000 for the quarter, taking its global billable headcount to 671,000. Geography wise, North America market ( 47% of revenue mix) continues to be the growth driver as it grew 22.8% YoY for the quarter while Europe and growth markets reported growth of 20.2% and 22.3% YoY, respectively. Utilisation declined 100 bps QoQ to 91% while attrition increased 200 bps QoQ to 20% for the quarter

Views: The new bookings reported growth for the quarter but we observed a deceleration in new bookings for outsourcing business, especially in the last two quarters. Historically, we have seen their correlation with revenues with some lag effect. Unless new bookings pace picks up , we may witness revenue growth slowing down YoY, going forward. Geographically, on overall revenues (consulting + outsourcing), we have been witnessing some downward trend. Accenture reiterates that it continues to gain market share. We believe that outsourcing revenue slowdown and market share gain for Accenture is not a good news for Indian IT companies, which may also witness slower revenue growth from H2FY23 onwards due to possible tech spending cut from some its large clients in US and Europe. IT companies were also hoping for pricing led benefit in the past, which seems to be a missed opportunity now

Impact: Negative