Accenture cuts revenue forecast in signal of slower consulting market

Accenture has cut its annual revenue forecast in the latest sign that the once booming consulting market is slowing.

Pointing to an “uncertain macro environment”, the New York-listed group said on Thursday that its full-year revenues would grow between 1 and 3 per cent, below an earlier prediction of 2 to 5 per cent, underlining the challenges facing the consulting sector.

Professional services firms are having to contend with slowing demand from clients and rising costs amid a tougher economic environment, as a combination of higher interest rates and geopolitical uncertainty prompt companies to spend less on consultants.

Shares in Accenture fell 8 per cent in early trading in New York, the biggest drop since the beginning of the Covid-19 pandemic in 2020. The consultancy group also forecast earnings per share of between $11.41 and $11.64, down from a previous range of $11.41 to $11.76 per share.

Chief executive Julie Sweet told an analysts’ call: “We get visibility into our clients’ budgets in January. So as we turned the page [into the new year] what we saw was a further tightening of spending [by] our clients and that affects our services.” She added that the spending restraint was tied to the “uncertain macro” picture.

Like many of its rivals, Accenture embarked on a hiring binge during the pandemic as it sought to meet rising demand from companies struggling to adapt to the changes wrought by the coronavirus crisis.

The company employs 740,000 people across 120 countries, offering IT and business strategy consulting and outsourcing such as customer service centres.

A year ago, Accenture announced plans to axe 19,000 jobs as businesses, particularly those in the tech sector, began to scale back spending on consulting services amid a tougher economic backdrop.

Accenture said revenues during the three months to February were flat compared with the same period last year, at $15.8bn.

Consulting revenues fell 3 per cent to $8bn while sales at its managed services, or outsourcing, division grew 3 per cent to $7.8bn. The overall slump was driven by the group’s communications, media and technology and financial services subdivisions, where sales fell 8 per cent and 6 per cent respectively during the quarter.

Operating income rose 5.7 per cent to $2.05bn in the quarter.

Accenture said demand for generative AI projects remained robust, with over $600mn in bookings during the quarter, taking total bookings in this area to $1.1bn during the first half of its financial year.

Deloitte this week announced the biggest overhaul of its operations in a decade as the Big Four firm, which competes with Accenture in parts of the consulting market, braces for a market slowdown.