Accenture recorded strong results with revenue growth of 12% YoY, which reflects strong demand for consulting and outsourcing. The US and APAC demonstrate strength with double digit growth. New bookings in outsourcing, a leading indicator, surged 28% YoY; this would benefit Indian IT vendors.

Increase in guidance for FY11

Accenture raised its full-year revenue guidance to 8-11% YoY growth from 7-10% earlier, on improved demand visibility. It also raised FY11 EPS guidance to USD3.08-3.16 from USD3-3.08 earlier.

2. Oracle reports a strong quarter

Robust growth in new software licenses, led by increased focus on discretionary spend, will benefit Indian IT vendors, which have higher exposure to enterprise application services. Revenue from services grew 24% YoY, which elucidates the stability of the high demand environment.

Enterprise applications have been experiencing high demand since the past two quarters. Sequential growth of all top-tier Indian IT vendors has turned positive due to increased spending on software licenses and their implementation.

US GDP growth - raised expectations from agencies

IMF raised its FY11 GDP growth expectations for the western economies and signaled a positive momentum in FY12 as well. According to data from Federal Reserve, the US companies are sitting on huge cash of ~USD1.8tn. Interest rates are very low in the US and companies are either offering dividend or are involved in stock repurchases. Another impact would be spurt in M&A-related activities in 2011. If the economic growth outlook becomes positive, companies may increase capex further, including tech investments.

Positive impact of cross currency

The IT companies will experience a positive impact of 1.2-1.5% QoQ on USD revenue, but rupee appreciation of 3.7% QoQ against USD will be a spoilsport. It will lower rupee revenue growth and negatively impact operating margins by ~150bps QoQ.