IT consulting and outsourcing firm Accenture has raised concerns about declining IT spending with a quarterly revenue forecast that fell short of Wall Street expectations. The announcement led to a more than 5% drop in the company’s shares. CEO Julie Sweet noted that clients were holding back on smaller deals due to an uncertain economic outlook, echoing sentiments expressed by Cognizant Technology Solutions last month.
Accenture’s current-quarter revenue forecast is in the range of $15.75 billion to $16.35 billion, while analysts had expected an average revenue of $16.35 billion. The company attributed the weakness to reduced spending in the tech, media, and communications industries, which have scaled back investments in response to slowing growth. Revenue for that business segment fell by 8% in the third quarter.
Accenture’s largest market, North America, also experienced poor performance during the March to May period, with revenue growth reaching a nearly three-year low of about 2%. Indian outsourcing giant Tata Consultancy Services had previously stated in April that the anticipated recovery in the US had not materialized as expected and had worsened instead.
Further challenges may lie ahead for IT companies as US Federal Reserve Chairman Jerome Powell hinted at the possibility of further interest rate hikes following one of the most aggressive policy tightening cycles on record.
While Accenture’s overall revenue for the third quarter rose by 3% to $16.56 billion, in line with estimates, its adjusted profit per share of $3.19 surpassed expectations of $3.04 per share.
Unlike some other tech executives, Sweet expressed that she does not anticipate generative AI to be a significant growth driver next year. Instead, the company will focus on assisting companies in completing their transitions to the cloud. Sweet expressed optimism about the continuation of larger digital transformational deals in the coming year due to the substantial amount of work remaining in that domain.
