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Negative read-through for Indian IT as outsourcing bookings weaken and discretionary spending stays muted

* Accenture (ACN) reported 3% YoY cc revenue growth in 3QFY26 at USD18.7b, at the mid-point of its quarterly guided range. ACN decreased the upper end of its FY26 cc revenue growth guidance to 3-4% from 3-5% earlier (4-5% excl. ~1% Federal headwind). The guidance continues to assume an inorganic contribution of ~150bp in FY26, implying organic growth of ~1.5-2.5% vs. 1.5-3.5% in the prior quarter. The guidance range reflects the indirect impact of the Middle East conflict, which has resulted in slower client decision-making, particularly in EMEA, and weighed on discretionary spending in the final weeks of the quarter.

* Total bookings declined 1.9% YoY to USD19.3b due to a combination of Middle East-related deal delays (~USD400m) and the slippage of a few large managed services contracts into FY27.

* Read-through for Indian IT: Negative. Outsourcing bookings are down 14.7% YoY, after decelerating sharply in the previous quarter as well. ACN has called out the impact of the war – direct impact from Middle East revenue and slower decision-making in EMEA. However, there are limited triggers right now to accelerate revenue. AI implementation revenue uptick is too fragile, whereas discretionary spends continue to be hit from multiple directions – war, macros, and, of course, AI.

* We expect 1QFY27 outcomes for most Indian IT large-cap companies to be similarly soft. On AI implementation, as we wrote in our report dated 20th May’26 (IT Services: More questions than answers), we believe the AI implementation opportunity will surely materialize, but it may not accrue to the traditional vendors like it did in the past and a new, platformised AI native vendor template will emerge. OpenAI’s DeployCo (and Anthropic’s services company as well) is the first credible blueprint of the next-gen system integrator. This will not be a winner-takes-all market and multiple vendors would survive as seen in the past cycles, but this will not be without a painful period of transition for the existing book of business.

Key highlights from the management commentary

* The Middle East conflict created a ~USD100m revenue headwind in 3Q, split evenly between direct regional impact and indirect effects on discretionary spend globally, primarily in Products and, to a lesser extent, Resources.

* Indirect impact materialized in the final weeks of the quarter; management expects the headwind to persist through 4Q, keeping more of the guided range in play.

* A couple of large managed services deals slipped into FY27 for company-specific reasons; management noted these are not expected to recover in 4Q and should not be interpreted as a meaningful 4Q uplift.

* Management views AI as a structural tailwind as it scales, acting as a catalyst for enterprise reinvention and creating new demand for services.

* Accenture Edge, a new mid-market-focused business targeting companies with USD300m-USD3b in revenue, is set to be launched next week. The addressable market is estimated at ~USD240b (growing in high single digits), designed to structurally offset large-enterprise discretionary spending pressure.

* Full-year FY26 cc revenue growth guidance is maintained at 3-4%; excluding federal drag (~1%), underlying growth is expected at 4-5%. FX is now expected to be a ~+2% tailwind for the full year.

Top end of FY26 organic growth guidance lowered; revised guidance of 1.5- 2.5% (or 2.5-3.5% excl. DOGE impact); outsourcing deal wins down 15% YoY

*  Revenue performance: Revenue stood at USD18.7b, up 3% YoY in CC (~1.5% organic YoY CC terms) in 3QFY26, near the upper end of the guidance range of 1% to 5%. Managed services revenue grew 5% YoY CC, while consulting services grew 1% YoY CC.

*  Bookings in 3Q: ACN reported outsourcing bookings of USD9.06b, down 14.7% YoY, while consulting bookings were up 13% YoY at USD10.26b. The book-to-bill ratio came in at 1x in 3QFY26, below the average of 1.2x over the past four quarters.

* Revenue guidance: ACN expects 4QFY26 revenue growth in the range of 1% to 5% YoY CC and downgraded its FY26 revenue growth guidance to 3-4% from 3- 5% earlier (excluding US Federal business negative impact of 1%). With an estimated FY26 inorganic contribution of ~1.5%, the organic growth guidance for FY26 stands at 1.5-2.5%.

* Vertical-wise performance: Growth was led by Communication, Media and Technology (9% YoY CC), while Products/Financial Services/Resources verticals grew 3%/3%/1% YoY CC each.

* Operating margin performance: Adj. EBIT margin was up 20bp YoY at 17.0% in 3Q. For FY26, adj. margin guidance was maintained at 15.8%.

* Muted headcount addition: ACN workforce was up QoQ by 1.5% at ~799k, attrition increased to 14% (vs. 13% in 2Q), and utilization stood at 93%.

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