'Not just one challenge; Accenture clients are facing everything, all at once'

Mint

20-06-2025

Accenture Plc. on Friday said Fortune 500 companies unnerved by global conflicts and tariff wars are holding back technology spending, prompting it to issue a muted guidance for the current quarter.
The subdued guidance rattled investors, with shares of the world's largest information technology outsourcer trading 7.6% at $283 at 8:30pm Indian time. The guidance could signal further challenges for India's $283 billion IT services companies, which started their fiscal year on a weak note.
Accenture recorded revenue growth—6% sequentially and 7.7% annually—to $17.73 billion, but the company expects slower days ahead. The company expects revenue of $17-17.6 billion in the fourth quarter (March to May). Accenture follows a September-August financial year while Indian IT firms follow an April-March calendar.
The company cut its headcount by 10,000 to end with 790,000 employees last quarter.
Accenture flagged the threat to businesses from US president Donald Trump's tariffs and policy flip-flops, coupled with the Iran-Israel conflict. This implies that new business might be harder to get for Indian IT outsourcers, who issue their quarterly earnings next month.
'As we shared last quarter, we continue to see a significantly elevated level of uncertainty in the global economic and geopolitical environment as compared to calendar year 2024,' said Julie Sweet, chair and chief executive of Accenture, during the company's post-earnings conference call.
The IT services company did not raise the upper end of its growth guidance of 7% for the full year, reflecting its views on the macroeconomic environment.
Accenture expects to spend up to $1.5 billion on acquisitions during this fiscal. The management said that about 3% of its full-year growth of 7% is expected from acquisitions.
Sweet added that clients were faced with multiple challenges at once.
'In every boardroom and every industry, our clients are not facing a single challenge—They are facing everything at once, economic volatility, geopolitical complexity, major shifts in customer behavior,' she said.
Accenture's dim outlook stokes further uncertainty for India's five largest software service providers including Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd, Wipro Ltd and Tech Mahindra Ltd, which struggled to bag deals valued at over $1 billion last fiscal. A dwindling large order book is further expected to raise questions on the readiness of Indian IT to weather the macroeconomic storm.
A third of Accenture's quarterly revenue came from its software products business.
Sweet added that the pause in tech spending was short and that clients wanted to be the first to adopt artificial intelligence (AI).
'I am talking to CEOs every day, and you know, there was this whole narrative about a pause and sitting on the sidelines. And I would tell you, it was very short. Our clients have moved from pause to focus and leapfrog,' said Sweet.
Earlier, an analyst said Accenture could face difficulty in bagging deals in the second half of the fiscal.
'Additionally, we believe Accenture faces difficult bookings compares in 2HFY25, which creates a tricky setup in a tepid backdrop,' said BMO Capital Markets analyst Keith Bachman, in a note dated 18 June. Bachman added that 'the economic environment has modestly weakened in aggregate,' signalling that times might be tougher for IT outsourcers as clients hold back their tech spending.
However, a bright spot in the company's report card was its GenAI (generative artificial intelligence) order book.
Accenture secured $1.5 billion in new GenAI bookings in the quarter, which comprised almost 8% of its overall order bookings of $19.7 billion for the quarter. In the same quarter, Accenture got revenues of $700 million from Gen AI projects. So far, since September 2023, the company has taken its total tally of orders in Gen AI to $7.1 billion.
For context, Accenture's total order bookings from GenAI alone is more than the FY25 revenue of Tech Mahindra Ltd, India's fifth-largest software services company. Tech Mahindra ended last fiscal with $6.26 billion in revenue.
Accenture was the first software services company to state its Gen AI deal value. This is in contrast to homegrown IT service providers, who are yet to spell out revenue or confirmed orders from the new technology.