AI jitters trigger another sell-off in IT stocks

Accenture Plc plunged 18% to a nine-year low on Thursday, sparking a wider sell-off in homegrown information technology (IT) companies listed in the US, as the world’s biggest IT outsourcer reported its lowest quarterly new order bookings since the first quarter of 2024-25 and provided a softer guidance than in the previous quarter.

Shares of Nasdaq-listed Cognizant Technology Solutions Corp. fell 9%, while the American depositary receipts (ADRs) of Infosys Ltd and Wipro Ltd on the New York Stock Exchange were down 8% and 6%, respectively.

“A sharp fall in Accenture’s price indicates that AI will eat away the IT services revenue at a much faster pace than previously anticipated,” said Amit Chandra, vice-president at HDFC Securities.

“Investors are probably not pleased with the low order bookings, especially the declining managed services bookings, as this is a proxy for the rest of the IT firms,” said Sushovon Nayak, lead IT analyst at Anand Rathi Institutional Equities.

Accenture, which follows the September-August fiscal year, compared to Indian IT’s April-March, reported $19.32 billion in new order bookings during the June quarter. This was a 12.6% decline from the preceding quarter and the company’s lowest in six quarters.

Managed services business, including software development, maintenance, cybersecurity, and digital work, drove the order book, accounting for about 47% of Accenture’s bookings in the third quarter. The rest of the new orders came from its consulting arm.

“If Accenture reported fewer new orders, Indian IT firms are unlikely to report significant deal wins in the near term,” added Nayak.

Homegrown IT services firms, including Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, and Wipro Ltd, will announce their first-quarter results in July.

Coincidentally, the weak performance came on the day Chris Ciauri, managing director of international affairs at Anthropic, said at an event in Seoul that the company is “confident” it will re-release its latest frontier AI models soon.

A US government export-control directive has flagged its Fable-5 and Mythos-5 AI models as a national security risk, banning them from global access.

The market is treating Accenture’s outlook cut as a warning signal for the entire services sector, said Phil Fersht, chief executive of HFS Research.

“Investors expected AI to drive an immediate growth acceleration, but what we’re seeing instead is a complex transition where legacy consulting demand is weakening faster than new AI revenues are scaling. The sell-off reflects growing uncertainty over how quickly services firms can reinvent themselves for the AI era,” he added.

The West Asia war dent

The Dublin, Ireland-based company reported $18.7 billion in revenue in the third quarter, up 3.74% quarter-on-quarter and 6% year-on-year.

“Sales in the Middle East (West Asia) were impacted by approximately $400 million, and also in EMEA (Europe, the Middle East and Africa) due to longer decision-making. Second, a couple of our large managed services opportunities moved into FY27 for companies’ specific reasons,” said chief executive Julie Sweet, during the post-earnings call.

Accenture reported a $100 million revenue loss due to the war in West Asia, pushing it to narrow its full-year revenue guidance to 3-4% from the previous quarter’s 3-5%. Of this, 1.5% is expected to come from acquisitions.

It acquired three cybersecurity companies, including Dragos, NetRise, and runZero, for a total enterprise value of $4.2 billion. The company also expects to increase its acquisition spending for the full year to $9 billion, up from the $3 billion outlined at the start of the year.

This mirrors the trend among homegrown IT services companies, which spent more than $5 billion on acquisitions in FY26, the highest since the turn of the century.

“One thing is clear: Accenture is facing AI-led deflation and is banking on competency-based acquisitions to offset that deflation, and increase TAM (total addressable market),” said Nayak.

However, Sweet maintained that AI will be a growth driver for the company. “The demand is the same. Getting ready for AI, then deploying it. We’re really optimistic because we believe AI is going to be a tailwind as it scales for us in the industry.”

Blow to investor confidence

For now, the shopping spree is scaring investors. “Two things appear to be spooking investors. First, the quantum of acquisitions by Accenture and IT firms suggests that the market is getting disrupted at a far faster rate than earlier anticipated, and so IT firms are buying companies, from cybersecurity to AI firms,” said an industry executive, on the condition of anonymity.

“A related point is that the overall guidance from these companies is still less than in the past. This suggests that inorganic growth will be the driver, and the traditional pool of revenue is evaporating.”