Accenture guides towards muted Q2 performance

Guiding towards another quarter of macro-economic pains for the IT consulting business, Accenture forecast second-quarter revenue below street expectations on Tuesday. Accenture reported revenues of $16.2 billion, an increase of 3% in dollar terms and 1% in local currency for its first quarter ended on November 30.

The IT consulting major anticipates cautious spending by clients as macroeconomic uncertainty continues to strain IT spending. Accenture expects revenues for the second quarter of fiscal 2024 to be in the range of $15.40 billion to $16.00 billion, or negative 2% to 2% in local currency, reflecting the company’s assumption of a negative 0.5% foreign-exchange impact compared with the second quarter of fiscal 2023. This was lower than street estimates of over $16 billion revenue for Q2.

While Accenture’s commentary bodes a grim future for the global IT sector, analysts said that Accenture’s flat growth in consulting and 6% growth in managed services continues to show that the managed services-heavy Indian IT sector is likely to see less impact.

For fiscal 2024, the company continues to expect revenue growth to be in the range of 2% to 5% in local currency.

Accenture’s 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.

“Discretionary spending is down and we’re right in the middle of the budget cycle. So next quarter, we’ll have a much better view of what they are, but if you look around in the environment, there aren’t a lot of green shoots on the economic side and obviously, the volatility on the geopolitical side continues,” CEO Julie Sweet told analysts in an earnings call adding that the company continued to see lower discretionary spending, which impacts its consulting type of work. Among Indian IT services majors, Wipro has the maximum dependence on consulting solutions.

Consulting revenues for the first quarter were $8.46 billion, flat in dollar terms and a decrease of 2% in local currency compared with the first quarter of fiscal 2023. Managed Services revenues for the quarter were $7.77 billion, an increase of 6% in dollar terms and 5% in local currency compared with the first quarter of fiscal 2023.Accenture’s new bookings for the quarter were $18.4 billion, with consulting bookings of $8.6 billion and managed services bookings of $9.8 billion.

In a huge positive for the sector, the company reported a headcount growth of over 10,200 to 743,041 over the previous quarter. The attrition rate was down from 14% in the previous quarter to 11%.

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