According to Wedbush Securities Managing Director Moshe Katri, the IT sector's problems extend beyond a single company's results, with the sector facing fundamental challenges that require more than just price corrections. As reported by CNBC TV18, Katri noted that valuations have fallen below the seven-to-eight-times EV/EBITDA range that investors previously viewed as the floor, making it difficult to call a bottom for the sector. Indian IT services stocks came under fresh pressure after Accenture cut its guidance, with stocks across the sector falling between 5% and 15% after the company's earnings, as reported by Prashant Nair and Nigel D'Souza. Katri emphasized that the market needs a sentiment shift, not just lower prices, before the sector looks attractive again, stating "It's difficult to really call the bottom here".
According to Katri's analysis reported by CNBC TV18, the good news from what we have seen so far is that margins are looking better than expected for the industry, but the major issue remains the absence of sustainable topline growth acceleration. He emphasized that the sector is unlikely to see a meaningful recovery until revenue growth improves, with the IT index currently down 24% so far this year. As reported by Prashant Nair and Nigel D'Souza, Katri stated that the negative so far is that we are yet to see any sort of topline growth acceleration or anything that's sustainable. That's the major issue here. He concluded that it's difficult to really call the bottom here without seeing sustainable revenue growth improvements.
As reported by CNBC TV18, Katri highlighted significant valuation compression in the US market, where IT services companies delivering low- to mid-single-digit growth now trade at six to seven times EV/EBITDA, compared with 15 to 20 times seen two to three years ago. He noted that these multiples apply to US companies and do not reflect the valuation premium enjoyed by Indian IT firms. According to Prashant Nair and Nigel D'Souza, this compression has created a challenging environment for the sector, with Katri adding that these multiples apply to US companies and do not reflect the valuation premium enjoyed by Indian IT firms.
According to CNBC TV18, Katri described Accenture as a bellwether name in general, with stocks across the sector falling between 5% and 15% after the company's earnings. He noted that Wedbush previously thought 7 to 8 times earnings was the floor for Indian IT valuations — that floor has now broken, requiring a sentiment shift rather than just lower prices before the sector becomes attractive again. As reported by Prashant Nair and Nigel D'Souza, the market reaction to Accenture's guidance cut demonstrates the sector-wide impact of individual company performance, with Katri stating "Accenture is a bellwether name in general".
As reported by CNBC TV18, Katri identified initial public offerings from Anthropic and OpenAI as potential turning points that could shift negative press attention away from IT services. He emphasized that companies need clear, distinctive AI-related work to justify investor interest right now, pointing to examples like Fractal Analytics, an Indian company, and Innodata in the US, which is growing about 40%. According to Prashant Nair and Nigel D'Souza, Katri added that he floated one possible turning point: initial public offerings from Anthropic and OpenAI, which he said could shift negative press attention away from IT services. He concluded that it's difficult to really call the bottom here without seeing sustainable revenue growth improvements.
