Accenture Anticipates Below-Target Q2 Revenue Amidst Subdued IT Spending

Accenture Stock

On Tuesday, IT services provider Accenture (NYSE:ACN) projected second-quarter revenue below expectations, citing cautious client spending in the face of lingering macroeconomic uncertainty. The company foresees a continuation of muted IT services expenditure in the near term, as businesses traditionally finalize their annual budgets post-February. Accenture highlighted the impact of slower budget-related decision-making, particularly in the technology and media sectors.

The first quarter witnessed a 10% decline in Accenture’s revenue from the communications, media & technology industry group. Sales in North America, the company’s largest market, also experienced a 1% drop, totaling $7.56 billion.

During an earnings call, CEO Julie Sweet acknowledged lower discretionary spending, affecting consulting work, and expressed concerns about the economic environment, noting, “If you look around the environment, there are not a lot of green shoots on the economic side.”

Similar concerns have been echoed by competitors in the outsourcing business. Tata Consultancy Services (TCS.NS) reported weaker-than-expected quarterly results in October, and Infosys (INFY.NS) adjusted its annual revenue forecast downward due to client hesitancy in spending on discretionary projects.

Accenture’s shares declined by 2.6% in pre-market trading.

Despite the cautious outlook, Accenture reiterated its fiscal 2024 forecasts for revenue growth and profit, anticipating the realization of significant digital transformation deals in the latter half of the fiscal year. The company reported generative artificial intelligence sales exceeding $450 million in the first quarter and expects clients to transition from experimentation to scaling up their GenAI projects in 2024.

For the second quarter, Accenture anticipates revenue in the range of $15.40 billion to $16 billion, falling short of the $16.29 billion forecast by analysts polled by LSEG. The company’s first-quarter revenue, ending on November 30, registered a 3% increase, reaching $16.22 billion.

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