Accenture Q1: Results better than expected, but Q2 guidance signals caution

Accenture’s revenue for the quarter came in at $15.7 billion, which was at the upper end of its guidance of $15.2-15.75 billion for the quarter.

Accenture beat revenue estimates for the first quarter (Sept-Nov) of the fiscal year 2023, which could be a good sign for Indian IT Services companies who will announce their quarterly results next month.

Accenture’s earnings come before those of India's major IT companies (it follows a September to August financial year), and usually is an indicator of how Indian IT companies' results are expected to pan out. A sizable number of the company’s employees are based in India as well.

Accenture’s revenue for the quarter came in at $15.7 billion, which was at the upper end of its guidance of $15.2-15.75 billion for the quarter. In Q4, Accenture had lowered its guidance in Q1 and had accounted for the impact of a stronger dollar. Revenues were up 5 percent on a year-on-year basis. Its operating margin was 16.5 percent after a 20 bps expansion.

During the quarter, Accenture said its new bookings for the quarter were $16.2 billion, with bookings of $8.1 billion for both consulting and managed services.

On a year-on-year basis, Accenture’s revenue from North America came in at $7.62 billion, up 10 percent year-on-year. On the other hand, its revenue from Europe declined 0.5 percent YoY to $5.07 billion.

For the next quarter, Accenture's revenue guidance was in the range of $15.20 billion to $15.75 billion, which was slightly below analysts' estimates.

For the 2023 fiscal year, Accenture said it now expects foreign exchange impact on its results to be -5 percent as compared to its previous estimate of -6 percent.

The company further said it expects revenue growth for the fiscal to be in the range of 8-11 percent.

These results come as analysts have predicted a slump for the sector due to macroeconomic challenges, an impending recession as well as inflationary concerns. A significant portion of the business of IT companies is derived from the US and Europe markets.

For the overall IT sector, experts maintained that it will be difficult to get visibility on 2023 spending as budgeting delays in client spending are expected.

While the December quarter is a typically slow quarter for IT companies, analysts also said that under-spending of budgets could affect the revenue for the December quarter, and expect that companies may not have better visibility about client budgets in the 2023 calendar year.

However, Moshe Katri of Wedbush Securities said that despite the weakness in key sectors and macro uncertainty in the US, the sector remains resilient as its cost-supply equation improves.

Katri said there were no indications of a demand slowdown, and that the worst case scenario is still a macro-driven slippage of one to two months in CY23 budget cycle decisions “impacting “fresh” funding for the new project starts for the March (2023) quarter, resulting in a back-end loaded CY23 year”.