Accenture warned that a drop in customer spending is affecting its consulting division and expected quarterly results, which may fall short of market expectations. According to the organization, customers are postponing business improvement projects.
On Friday, the company’s stock dropped as much as 6 percent. Following the pandemic-driven boom, expenditure on IT and transformation initiatives decreases as companies choose projects that provide quicker returns in an uncertain environment.
During a post-earnings conference call, Chief Executive Julie Sweet said that customers “are more focused on cost resilience and many of them are having to make really hard choices.”
According to Sweet, Accenture’s strategy and consultancy business will decline marginally in the company’s second quarter. She said that although customers are still investing in technology, cloud services, and cost-cutting projects, marketing and advertising campaigns are on the decline, with retailers scaling down significantly.
Accenture expects sales to range between $15.2 billion and $15.8 billion in the second quarter. According to Refinitiv, analysts projected $15.6 billion on average.
Last month, competitor Cognizant lowered its yearly sales and profit forecast, citing rising expenses and contract losses. According to Morningstar analyst Julie Sharma, demand for new consulting contracts will be lower in fiscal 2023.
Great earnings despite forecast
“We think generally, caution will persist – leading to delays in decision making, and that spending will be the softest in smaller deals over larger deals, where hitting the pause button has more repercussions”, Sharma added.
The weak outlook overshadowed the company’s higher-than-expected revenue and earnings in its first quarter, which ended on November 30. Sales rose 5 percent to $15.7 billion, beating analyst expectations of $15.6 billion.
Adjusted earnings per share also performed well, hitting $3.08 per share compared to the average estimate of $2.91 per share.