Accenture forecasts downbeat year as IT spending stays weak

(Reuters) -IT services firm Accenture forecast full-year earnings and first-quarter revenue below Wall Street targets on Thursday, signaling that high inflation and interest rates would choke enterprise spending through next year.

Shares of the company fell 4.9% in trading before the bell after its fourth-quarter revenue also missed estimates.

The prospect of higher-for-longer borrowing rates is forcing businesses to rethink their digitization plans and technology budgets, hurting companies like Accenture that offer IT services ranging from strategy consulting to cloud migration.

“We have seen greater caution globally with lower discretionary spend, slower decision-making, and in particular for us, a significant impact from the challenges the communications, media and tech industries (CMT) have faced,” Accenture CEO Julie Sweet said.

Revenue from the CMT segment fell 12% in the fourth quarter.

Indian IT services giant Infosys also halved its full-year revenue forecast in July, citing delayed decision-making on future projects from clients, while Tata Consultancy Services flagged soft demand.

“Forward-looking spending for both the IT consulting and outsourced IT sectors is decelerating to extremely low levels,” said Erik Bradley, chief strategist at Enterprise Technology Research (ETR).

Generative artificial intelligence (AI) is also not seen as a big growth driver in the coming year. Accenture recorded $200 million in revenue from the sector in the fourth quarter, and expects customers to be experimental with their generative AI spending.

The company expects first-quarter revenue in the range of $15.85 billion to $16.45 billion, while analysts polled by LSEG estimated $16.43 billion.

Accenture forecast fiscal 2024 adjusted earnings per share in the range of $11.97 to $12.32, below estimates of $12.45. The mid-point of its revenue growth forecast of 2% to 5% in local currency also fell short of expectations.

Revenue rose 4% to $16 billion in the fourth quarter ended Aug. 31.

(Reporting by Chavi Mehta in Bengaluru; Editing by Shinjini Ganguli and Devika Syamnath)