Accenture forecasts first-quarter revenue below estimates as tough economy weighs in

Accenture forecasts downbeat year as IT spending stays weak

Dublin-headquartered IT giant Accenture saw its Q4 revenue numbers within its guided range but fell short of estimates as inflationary pressures continue to weigh on IT spending, with the company recording $15.99 billion in revenues in Q4FY23. Accenture follows a September-August financial year. For the full year, Accenture’s revenue came in at $64.1 billion, up 4 percent year-on-year.

Accenture’s numbers are seen as a bellwether for the Indian IT sector, and give an indication of how Indian IT companies’ numbers are likely to fare with the earnings season for the quarter kicking off on October 11. A significant portion of Accenture's employees are located in India as well.

What may be a cause for concern for Indian IT is Accenture’s guidance. The company has guided revenue growth of -2 to 2 percent in Q1FY24. For the full year, it expects revenue growth to be in the range of 2-5 percent. On the full year's guidance, CEO Julie Sweet told analysts that Accenture is not assuming "that there's an improvement in the discretionary spend environment or the macro", and that the company would look to pivot to areas of growth.

Indian IT was already expected to have a tough FY24, and last quarter, Infosys too sharply cut its guidance for the full year. With clients continuing to focus on cost takeout and efficiency deals and pulling back on discretionary spending, it may be signs of worsening stress.

In Q4, Accenture had new bookings of $16.6 bn, a decline of 10 percent. Of this, $8.5 billion came from consulting and $8.2 billion from managed services.

With IT companies currently operating in a challenging macroeconomic climate, Accenture’s numbers showed that its revenue growth in North America was flat year-on-year, and was up 10 percent in Europe, and 1 percent in other growth markets. Sweet said they had to navigate a macro environment that was tougher than anticipated at the beginning of FY23, with differences across markets and industries.

"We have seen greater caution globally with lower discretionary spend and lower decision making," she said.

By vertical, the biggest impact in Q4 was in Communications, Media & Technology, which fell by 12 percent. Financial services grew by 3 percent, Health & Public Service by 13 percent, products by 6 percent and Resources by 10 percent.

On the pronounced slowdown in the CMT vertical, CEO Julie Sweet said the slowdown is broad-based and seen across the globe. "We do know that it's going to develop a little bit differently based on markets.. over the course of the year, we expect that the improvement will come at a little different pace, depending on the market," she said.

In addition, Sweet added that the company has gotten generative AI bookings of $200 million in the last quarters, but maintained that it is still early days for the technology, and it is in experimentation.

The company currently has 732,819 employees, a headcount increase of 951 sequentially. Attrition was flat at 13 percent.

Also Read: IT consulting firm Accenture to cut 890 jobs from Irish operations