Accenture forecasts Q2 revenue below estimates on cautious IT spending by clients

IT services provider Accenture has forecast second-quarter revenue below Wall Street targets on Tuesday, anticipating cautious spending by clients as macroeconomic uncertainty remains an overhang, a news that could have a bearing on the stock prices of leading IT firms like TCS, Infosys.

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

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

Tata Consultancy Services reported weaker-than-expected quarterly results in October, while Infosys 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 CEO said the firm's new generative artificial intelligence bookings were worth over $450 million as companies remain experimental with their spending on the technology.

Julie Sweet, chair and CEO, Accenture, said: “I am pleased that we delivered on our commitments this quarter while strategically investing at scale for future growth. Our deep and trusted client relationships are again reflected in the 30 clients with quarterly bookings of more than $100 million. And we continue to lead our industry in Gen AI – the great accelerator of reinvention – with over $450 million in new bookings. I am incredibly grateful to the 743,000 people of Accenture, who are steadfastly dedicated to helping our clients achieve their ambition
to grow and thrive in the years ahead.”

Accenture's shares fell 1.7% in pre-market trading. They have gained over 28% so far this year, outperforming the benchmark S&P 500 index .SPX.

The firm reiterated its fiscal 2024 forecasts for revenue growth and profit.

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%, to $16.22 billion.

With inputs from Reuters