Accenture Forecasts Lower Earnings and Revenue, Citing Economic Factors
September 28, 2022
IT services firm Accenture has announced that it expects its full-year earnings and first-quarter revenue to fall below Wall Street targets. The company attributes this forecast to the impact of high inflation and interest rates, which are expected to affect enterprise spending throughout the coming year.
Following the announcement, Accenture’s shares fell by 4.9% in pre-market trading, and its fourth-quarter revenue also missed estimates. The company is not alone in facing these challenges, as other IT services giants such as Infosys and Tata Consultancy Services have also reported similar issues. These firms have cited delayed decision-making and soft demand as major factors affecting their revenue projections.
Accenture CEO Julie Sweet acknowledged the cautious approach taken by businesses in light of the prospect of higher borrowing rates. This cautiousness has forced businesses to reevaluate their digitization plans and technology budgets, impacting companies like Accenture that offer IT services ranging from strategy consulting to cloud migration. The company’s revenue from the communications, media, and tech (CMT) segment fell by 12% in the fourth quarter.
In addition to economic factors, the company also highlighted that generative artificial intelligence (AI) is not expected to be a significant growth driver in the coming year. While Accenture recorded $200 million in revenue from the sector in the fourth quarter, it anticipates that customers will be more experimental with their generative AI spending.
Looking ahead, Accenture expects first-quarter revenue in the range of $15.85 billion to $16.45 billion, falling slightly short of analysts’ estimates of $16.43 billion. Furthermore, the company’s fiscal 2024 adjusted earnings per share forecast of $11.97 to $12.32 is below market expectations of $12.45. The mid-point of its revenue growth forecast of 2% to 5% in local currency also disappoints.
Despite the challenges, Accenture reported a 4% increase in revenue to $16 billion for the fourth quarter ended August 31.
The company’s forecast reflects the caution and uncertainty surrounding the global economy and its effect on the IT services industry. Businesses are facing pressure to realign their budgets and spending priorities, impacting companies that provide services in this sector. It remains to be seen how long these economic challenges will persist and how they will affect the overall business landscape.
Reporting by Chavi Mehta in Bengaluru; Editing by Shinjini Ganguli and Devika Syamnath