Accenture Plc has recently announced a lowering of its annual revenue and profit forecasts. The company also revealed that it would be cutting approximately 2.5% of its workforce, signaling a negative economic outlook in the IT industry. Accenture’s announcement follows a trend in the tech sector of laying off hundreds of thousands of employees due to a decline in demand caused by high inflation and rising interest rates.
The job cuts will mostly affect non-billable corporate functions, with over half of the 19,000 positions to be eliminated. Despite this news, Accenture’s shares rose over 4% before the market opened.
Rival Cognizant Technology Solutions (CTSH.O) had already pointed to “muted” growth in bookings for 2022, while IBM Corp (IBM.N) and Tata Consultancy Services (TCS.NS) have also indicated weakness in Europe, where client spending has been impacted by the Ukraine war.
As a result, Accenture has adjusted its projections for annual revenue growth to be between 8% and 10%, compared to its previous estimate of an 8% to 11% increase. The company now expects earnings per share to be in the range of $10.84 to $11.06, down from the previous forecast of $11.20 to $11.52.
Despite the challenging economic environment, Accenture’s CEO, Julie Sweet, stated that companies remained focused on executing compressed transformations, referring to how businesses are trying to become leaner in these turbulent times.
In a survey conducted by U.S.-based Enterprise Technology Research, over 1,000 IT decision-makers revealed that they plan to reduce their 2023 budget growth. The growth expectations are now at 3.4%, down from the 5.6% increase recorded in October 2022. According to Erik Bradley, chief engagement strategist at the technology market research firm, the data indicates a difficult environment ahead for consulting firms.