Software & Services share price target

Accenture (ACN) has reported strong revenue growth of 15% YoY CC, 5.2% YoY US$ in Q1FY23 (Nov 22-end), above the guided range of 10-14% YoY CC.

Realistic Expectations, Reasonable valuations; Either recession fear overstated or growth moderation yet to play out

In our third edition of ‘The Color of Cloud’, detailed analysis of the performance of hyperscalers and software/SaaS companies indicates that demand environment has incrementally slowed down & number of software vendors and hyperscalers highlighting the macro impact has increased.

Revenue growth for most IT companies under our coverage was healthy in CC terms in
Q2FY23. Growth rate ranged between 2.9-4.1% QoQ CC for tier-1 companies, 1.6-7.2%
QoQ CC for tier-2 companies, and 4.5-10% QoQ CC for ER&D companies.

According to our proprietary model, B2B e-commerce total addressable market (TAM) is poised for a CAGR of ~55.8% over FY23E-FY25E.

IT Q2FY23 - Earnings Preview

Over the past one year, the trajectory of NSE IT and NASDAQ has been similar. Both
indices are down 32% from peak (NSE IT peak: 39,371 on Jan 04, 2022 and NASDAQ
peak of 16,568 on Dec 27, 2021).

We believe the disconnect between macro (weakening US and European economy,
moderation in demand etc.) and micro (commentaries from management) will no longer continue.