Accenture’s Warning on US Spending Cuts Sparks Concerns for IT Sector, But Indian Firms May Avoid Major Impact

Accenture has warned of potential declines in order bookings due to US government spending cuts, causing its stock to drop 7.26%. However, analysts suggest Indian IT firms may be less affected as they have minimal exposure to US federal contracts. Accenture’s Generative AI (GenAI) services continue to grow, with $2.6 billion in bookings in H1 FY25. Nomura sees Indian IT sector growth bottoming out in FY25, recommending Infosys and Coforge.

Nuvama and JM Financial warn of ongoing uncertainty, impacting short-term performance. Infosys’ Q4 results on April 17 will be closely watched. Accenture’s revenue took a hit due to the DOGE cost-cutting program under Elon Musk and Trump. The US General Services Administration has canceled 1,700 contracts, saving $4.5 billion. Despite exceeding earnings expectations, Accenture faces uncertainty in federal contracts. Other firms like Booz Allen Hamilton (-8.1%) and IBM (-3.56%) also saw stock declines due to public sector exposure.

Accenture’s Warning on US Spending Cuts Sparks Concerns for IT Sector, But Indian Firms May Avoid Major Impact

India’s IT industry is drawing attention as Accenture warns of possible declines in new contracts due to anticipated spending cuts by the US government. With the Q4 earnings season approaching, investors are eager to see how Indian IT companies will be affected. However, analysts believe the impact will be minimal since Indian IT firms have little dependence on US federal contracts, unlike Accenture.

Accenture’s Situation

Accenture has cautioned that reduced government spending in the US might result in fewer new contracts. However, there have been no reports of project cancellations so far. Interestingly, the economic uncertainty has led some companies to focus more on cost-cutting, which could increase demand for consulting services. One positive development for Accenture is its rising revenue from Generative AI (GenAI) services, with bookings reaching $2.6 billion in the first half of FY25, compared to $3 billion for the whole of FY24.

How This Affects Indian IT Companies

According to Nomura, Indian IT firms are in a better position than Accenture since they do not rely on US federal contracts. While businesses are expected to be more cautious with IT spending due to economic concerns, the situation is unlikely to become severe unless the global economy faces a major downturn. Nomura predicts that growth in India’s IT sector will bottom out in FY25 before starting to improve. They recommend Infosys as a top large-cap choice and Coforge for midcap investors.

On the other hand, Nuvama highlights that uncertainty remains a significant challenge for the technology sector. Although they remain optimistic about long-term growth, short-term instability could affect stock performance. JM Financial also notes that Indian IT companies are not directly impacted by US government budget cuts, but general uncertainty and flat client budgets for 2025 may lead to cautious earnings forecasts for firms like Infosys and HCL Tech.

What’s Next?

Infosys will release its Q4 earnings on April 17, and investors will be closely monitoring whether discretionary IT spending is showing any signs of recovery. Recent market corrections have already accounted for some economic concerns, but the FY26 outlook could influence stock movements in the months ahead.

Accenture’s Stock Decline Amid US Spending Cuts

Accenture’s stock dropped 7.26% to $300.91 after it warned that reduced US government spending is affecting its federal contracts. Over the past month, the stock has fallen nearly 23%, with a 12.79% decline over the past year.

Accenture, a major consulting firm with around 800,000 employees, has been impacted by the US Department of Government Efficiency (DOGE), a cost-cutting program initiated by Elon Musk under the Trump administration. This initiative is focused on reducing government expenses by reviewing and eliminating non-essential consulting contracts.

Julie Sweet, Accenture’s CEO, stated that federal contracts accounted for 8% of the company’s total revenue and 16% of its Americas revenue in 2024. The slowdown in new government contracts has negatively affected sales and revenue, adding to economic and geopolitical uncertainties.

As part of the DOGE initiative, the US General Services Administration has already canceled 1,700 consulting contracts, saving an estimated $4.5 billion. While Accenture remains confident in the importance of its federal projects, ongoing contract reviews could continue to impact its business.

Despite these challenges, Accenture’s latest earnings exceeded expectations, with reported earnings of $2.82 per share on $16.66 billion in revenue, slightly ahead of analyst predictions. However, concerns about future revenue from government contracts have led to broader sell-offs in the consulting sector.

Impact on Other Consulting Firms

Other firms with significant government contracts also faced stock declines. Booz Allen Hamilton’s stock dropped by 8.1%, while IBM, which earns 10–15% of its revenue from public sector contracts, saw its stock fall by 3.56% to $242.32.

IBM had been performing well in 2025 due to strong AI-driven enterprise growth, but concerns over government contract reviews could hurt its consulting division. Analysts warn that if the government continues to reassess contracts, IBM’s consulting revenue—already down 2% in the December quarter—may face further declines, potentially slowing down its recovery.

While IBM’s stock remains positive for the year, Accenture has struggled more than its peers, with the uncertainty surrounding federal spending weighing heavily on its overall financial performance.