Accenture's Forecast Falls Short
In a recent announcement, IT services firm Accenture projected its full-year earnings and first-quarter revenue below Wall Street's expectations. This forecast signals potential challenges ahead due to the impact of high inflation and rising interest rates, which are expected to affect demand in the coming year.
Earnings and Share Performance
Immediately following the announcement, Accenture's shares experienced a nearly 5% drop in pre-market trading. This decline was exacerbated by the company's fourth-quarter revenue falling short of estimates.
Federal Reserve's Influence
Adding to the concerns is the U.S. Federal Reserve's recent indication that it will maintain elevated interest rates for a longer duration than originally anticipated. This has raised worries that enterprise spending may take more time than expected to return to healthy levels.
Accenture is not the only player facing challenges in the IT services industry. Indian IT services giant Infosys previously lowered its full-year revenue forecast in July, attributing it to delays in clients' decision-making processes for future projects. Tata Consultancy Services also cited soft demand in their outlook.
Accenture's first-quarter revenue is expected to range between $15.85 billion to $16.45 billion, falling slightly below the $16.43 billion forecasted by analysts polled by LSEG. Additionally, the company anticipates fiscal 2024 adjusted earnings per share to be in the range of $11.97 to $12.32, which is lower than the estimated $12.45. The mid-point of their revenue growth projection of 2% to 5% in local currency also falls short of expectations.
Shift in Strategy
In contrast to some other tech companies, Accenture's CEO, Julie Sweet, expressed in June that she does not anticipate generative artificial intelligence to be a significant growth driver in the coming year. Instead, the company is focusing on assisting businesses in completing their migration to the cloud.
Accenture's revenue for the fourth quarter ending on August 31st increased by 4% to $16 billion. While this surpassed some estimates, it still fell short of the $16.08 billion expected by analysts.