Accenture says no improvement in overall spending by clients, particularly in smaller deals

Accenture

World’s largest information technology services company Accenture has reiterated that there is no improvement in overall spending by clients, particularly in smaller deals. The management highlighted its strategy of targeting larger “reinvention” deals worth over $100 million has worked.

“Last year, when we saw the constrained spending, particularly on the smaller deals, we pivoted to really focusing on winning more reinvention (deals)… Went after the demand. That's why we did underscore that the market environment has not changed,” chief executive Julie Sweet told analysts after declaring the results.

The company won 30 quarterly client bookings worth over $100 million, which is a decline from a record 125 such deals it won last quarter. In Q1FY24, the company had bagged 30 clients with more than $100 million in quarterly bookings.

Given that Accenture operates in the same market as its Indian IT rivals, its results often serve as an indicator of the broader trends and potential outcomes within the over-five-million-strong Indian IT sector.

Accenture’s revenue for the first quarter of fiscal 2025 rose 9 percent year-on-year to $17.7 billion, beating analyst estimates of $17.12 billion. The company recorded new bookings worth $18.7 billion, an increase of 1 percent.

“When spending does come back and the market does improve, we're at the heart of our client's business, and we should be well capitalised to pick up on that spending,” Sweet said.

Earlier this year, Accenture said reinvention deals are about using tools like Generative AI to help businesses move faster and stay ahead of competitors.

When analysts asked about the timeline for client IT budgets, the management said they expect to have more clarity by January-February. “We do anticipate getting that visibility in January and February. Where we see the biggest opportunity when companies start to get more confident to spend more is going to be in moving faster with their data foundation that fuels AI,” Sweet said.

She also believes the current spending is more like prioritisation within existing budgets.

The Donald Trump Show

The management added that with Donald Trump in power in the US, the company will see an even greater appetite for taking commercial solutions to the federal government.

The Dublin-headquartered firm works on multiple mission-critical projects for the government.

Sweet said Accenture has a strong position when it comes to supporting the federal government’s mission to enhance security, improve citizen services, and drive greater efficiency.

The company’s leadership in cloud, data, and AI was presented as critical for modernising federal operations and delivering mission-critical programs. “We see a real opportunity to continue to partner with the new administration, as we've partnered with all administrations… Really, really feel good about where we are positioned in the federal government to help this agenda,” Sweet said.

Also read: Can Accenture's better than expected earnings usher optimism for IT stocks?