Accenture lowers revenue forecast as tough macro economy weighs

In premarket trading, the company's shares dropped by approximately 5% in the New York Stock Exchange.

IT services provider Accenture lowered its revenue forecast for fiscal year 2024 on March 21, due to economic uncertainty leading clients to reduce spending on consulting services.

Accenture's revised outlook anticipates full-year revenue growth to be within the range of 1 percent to 3 percent, compared to its earlier projection of 2 percent to 5 percent.

In premarket trading, the company's shares dropped by approximately 5 percent in the New York Stock Exchange.

Accenture's performance is widely regarded as a benchmark for the Indian IT industry, providing a glimpse into the expected outcomes for Indian IT companies. Fourth quarter earnings season commences on April 12, with bellwether TCS reporting its earnings.

Given that a substantial portion of Accenture's workforce is based in India, its results often serve as an indicator of the broader trends and potential outcomes within the Indian IT sector.

Also read: Infosys, Wipro ADRs trade up to 4% lower as Accenture slashes revenue growth guidance

The Dublin-headquartered IT giant saw its Q2 revenue at $15.8 billion. Accenture follows a September-August financial year.

Accenture had new bookings of $21.6 billion, a decline of 2 percent. Operating margin came in at 13 percent, compared to 12.3 percent in the second quarter of fiscal 2022-23.

"We see pressure in the volume of our smaller deals and that's why we have the 1-3 percent guidance for the full year," said chief executive officer Julie Sweet to investors. In the same breath, she also said that the larger deals were "terrific" not just in the quarter gone by but for the first half fiscal year.

Last month, rival Cognizant faltered with topline and bottomline numbers on account of tepid discretionary spending by clients.

Geography-wise, revenue was flat in North America year-on-year, while the Europe, Middle East, and Africa region increased marginally by 1 percent. Other markets decreased by a percent in the second quarter of fiscal 2023.

Sweet said clients are unable to allocate extra budget as overall spending is constrained. "That's tied to the uncertain macro that's putting people constrained, when one banker said the corporates have put themselves on a diet."

On the verticals front, the largest one increased by a percent to $4.76 billion year-on-year. Next in line, the Health & Public Service vertical increased by 10 percent to $3.33 billion during the same period. However, as seen in other IT companies, the financial services vertical did not perform well and decreased by 6 percent to $2.81 billion.

Accenture's new generative AI bookings were worth over $600 million in the quarter.

The company currently has 742,318 employees, a headcount decrease of 723 sequentially. Attrition rate increased by 2 percentage points to 13 percent for the quarter.

Also read: Accenture’s $450-million Gen AI pipeline is more than the top 10 Indian IT companies’ combined