Accenture forecasts Q2 revenue below estimates on muted IT spending

IT services provider Accenture forecast second-quarter revenue below Wall Street targets on Tuesday, anticipating cautious spending by clients as macroeconomic uncertainty remains an overhang.

Analysts expect IT services expenditure to remain muted in the near term as businesses typically decide their annual budgets only after February. Accenture itself has pointed to slower budget-related decision-making, especially in tech and media companies.

Accenture’s revenue from the communications, media & technology industry group fell 10 per cent in the first quarter, while sales from North America, the company’s biggest market, fell 1 per cent, to $7.56 billion.

“We continued to see lower discretionary spend, which impacts our consulting type of work,” CEO Julie Sweet told analysts in an earnings call.

“If you look around the environment, there are not a lot of green shoots on the economic side.”

Tata Consultancy Services (TCS.NS), India’s No.1 IT services exporter, reported weaker-than-expected quarterly results in October, while Infosys (INFY.NS) cut the upper end of its annual revenue forecast, as clients were still hesitant to spend on discretionary projects. Both companies are Accenture’s competitors in the outsourcing business.

Accenture’s shares fell 2.6 per cent in trading before the bell.

The firm reiterated its fiscal 2024 forecasts for revenue growth and profit as it expects large digital transformation deals to materialize in its results in the “back half of our year”.

It recorded generative artificial intelligence sales of over $450 million in the first quarter and expects clients to shift from experimentation to scaling up their GenAI projects in 2024.

Accenture expects revenue in the range of $15.40 billion to $16 billion. Analysts polled by LSEG had forecast revenue of $16.29 billion.

Its revenue in the first quarter ended Nov.30 rose 3 per cent, to $16.22 billion.