Accenture forecasts Q2 revenue below estimates amid cautious IT spending environment

Global IT services provider Accenture has projected second-quarter revenue below Wall Street expectations, citing client caution amid ongoing macroeconomic uncertainty. The company anticipates subdued IT services expenditure in the near term, a trend likely to persist until businesses finalise their annual budgets after February.

Accenture highlighted a slowdown in budget-related decision-making, particularly within the technology and media sectors. The company's first-quarter results revealed a 10 per cent decline in revenue from the communications, media and technology industry group and a 1 per cent dip in sales from its largest market, North America, amounting to $7.56 billion.

CEO Julie Sweet attributed these figures to reduced discretionary spending, impacting the consulting aspect of their business.

During an earnings call, Sweet remarked, "If you look around the environment, there are not a lot of green shoots on the economic side."

This cautious sentiment aligns with a broader industry trend, as evidenced by Tata Consultancy Services (TCS), India's top IT services exporter, reporting weaker-than-expected quarterly results in October. Similarly, Infosys adjusted its annual revenue forecast downward due to client hesitancy to invest in discretionary projects. Both TCS and Infosys are key competitors in the outsourcing sector, alongside Accenture.

Prior to the official announcement, Accenture's shares fell 2.6 per cent in pre-market trading.

Despite the subdued outlook, Accenture reiterated its fiscal 2024 forecasts for revenue growth and profit, expressing optimism that significant digital transformation deals would materialize in the latter part of the fiscal year.

In the first quarter ending November 30, Accenture achieved a 3 per cent increase in revenue, reaching $16.22 billion. Notably, the company reported generative artificial intelligence sales exceeding $450 million during this period. Accenture anticipates a shift among clients from experimental phases to scaling up their Generative AI (GenAI) projects in 2024.

Looking ahead, Accenture expects its Q2 revenue to fall within the range of $15.40 billion to $16 billion, falling short of the $16.29 billion forecast by analysts polled by the London Stock Exchange Group (LSEG). The company remains watchful of the evolving economic landscape while positioning itself for potential growth in the latter part of the fiscal year.

(With Reuters inputs)