Customers in waiting and watching mode will need a quarter to measure the impact of tariffs: Accenture

They noted that the current volatility could actually power the transformation of companies led by artificial intelligence (AI), adding that companies are moving more than a quarter of their annual technology spend to AI-LED solutions, especially Generative AI or Genai.

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Ryoji Sekido, CEO of Asia Oceania, Aspenture, head of global IT services markets, said it was too early to have any speculative discussions, but uncertainty and volatility were certainly increasing. “That’s why customers are looking for more attractive business cases and very tangible solutions, whether we can achieve the results of their attempts to initiate or even AI-based transformations.”

To be sure, US President Donald Trump suspended 90 days on April 9. Sekido agrees that this gives the industry some time to prepare. “At the same time, my view is that this volatility will be more of a customer-oriented AI switch, as AI is seeking more efficiency, more agility, and more speed to customers at the end of the day.”

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“Maybe it will take about a quarter of time to really understand these meanings and then there will be better clarity,” said Saurabh Kumar Sahu, managing director and leader of the company’s India business. While customers may wait and watch before opening their wallets, technology spending will continue to remain relevant.

According to Sahu, customers are increasingly shifting their spending to Genai due to interest in the benefits of new technologies. “It’s very clear that about 25-30% of technology spending today is attracting AI and Genai because the company sees the value of that value in terms of ROI (ROI).

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It is worth noting that Accenture has been leading the trade in the Genai space. In the first two quarters of fiscal 25 (September to May), its new orders were $39.6 billion, and its Genai transactions were worth $2.6 billion. In the last fiscal year, it had completed a new Genai deal worth $3 billion, bringing it to a total of $5.6 billion in a year and a half. Meanwhile, TATA Consulting Services (TCS) disclosed in its annual report for fiscal 24 that it has completed more than 130 transactions and 20 new clients have played the finance along with AI and Genai use cases.

Growth issues

Accenture’s growth alert comes as the IT services industry is working to slow its business in recent years and quarters. TCS, headquartered in Mumbai, India’s largest IT services company, increased its revenue in January-March by 1.4% to $7.5 billion, while Bengaluru’s total Wipro Ltd fell 1.2% to $2.6 billion in revenue in the same quarter.

But Infosys Ltd, India’s second largest IT services company, reported higher figures in the fourth quarter, growing 4.8% first-class at a constant currency rating to $4.7 billion.

Meanwhile, Accenture’s second quarter (December-December) revenue rose 5% year-on-year to $16.7 billion after the September-August fiscal year.

The company also increased its full-year revenue growth outlook for FY25 from 4-7% to 5-7%, with revenue growth expected from March to May (third quarter) to 3-7%, even though Infosys estimates revenue growth of 0-3% in FY26, while WIPRO estimates 1.5-3.5% of April to June revenue. TCS does not provide future revenue estimates.

Analysts see a significant slowdown in the industry’s growth over the next few years. “While the income (less) and PE multiple (more) have been corrected since January 1, 2025, we suspect that earnings in FY26 and FY27 may be cut further under current macro conditions, we believe that after Infosys announced its results, broker Bob Capital Markets said in an April 18 note that we think this may last longer.”

“We believe that the industry’s structured dollar organic revenue growth from here will be lower than the compound annual growth rate of about 7% during the fiscal 2015 period, possibly in the constant currency (CC) term compared to the CAGR of FY25,” the broker added. “Now, companies at the Indian level face competition from Accenture (especially losing their business due to Doge), Tier-2 players and cognitives, and their growth may slow their growth compared to FY20.”

It is worth noting that Accenture and other consulting firms are within the scope of the U.S. government’s cuts in federal spending. Despite the good numbers, Accenture is also facing growth.

In its April 6 report, Incre Equities noted that new bookings for the first half of the year (September to September) for fiscal 25 were down 1% for the company’s revenue, the first since H1FY in 2015. To be sure, Accenture’s new bookings in Q2 alone dropped 3% year-on-year to $200.9 billion, reflecting the challenge of getting deals from customers tightening discretionary spending.

“While the spending comments on CY25F are still unknown, industry discussions show that the sense of urgency is less meaningful and that the start of the project may shift correctly,” Abhishek Shindadkar, a research analyst in the report, said in the report. “As for demand trends, most verticals appear to be in a wait-to-see mode and industry-specific challenges arise in manufacturing (especially automotive), high-tech (especially advanced standards) verticals and healthcare (early noise).

Genai won’t affect coders

Both Accenture officials believe that even if Genai continues to automate tasks, engineers will remain relevant, although the nature of the engineers will change.

“Everything is more defined today, not only in the enterprise but also in machines, infrastructure, cars, etc.,” Sekido said. “So we’re going to have serious supply issues with engineering resources. That’s why my point is that Genai won’t reduce (demand).

“There’s no way to go away,” Sahu said. “A different type of engineering will be in place. Genai will need a lot of timely engineers, and this is the next one… It’s a lot of science, and that’s where we’ll attract in skills and recruitment.”

Sahu still remains unclear about the company’s recruitment plan for Indians and said it will be recruiting based on market demand, saying Genai will not affect the company’s recruitment.

“If the market demand for Genai technology increases, we will need more people to better understand Genai or AI technology,” Sahu said. “It could be a combination of people there today, will be re-skilled, and the new people we hire from the market. So, because of Genai, I don’t see any bias in our hiring strategy.”