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revenue guidance: Accenture Q4 net income down 16%, pegs FY24 revenue guidance at 2-5%

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IT company Accenture Plc clocked a net income of $1.41 billion for the quarter ended August, a 16% year-on-year fall due to pain in communications, media and tech verticals even as it gave tepid guidance for the fiscal ending 2024.

The company’s fourth quarter revenue was slightly lower than street estimates at $16 billion, up 4% on year. The company’s full year revenue also rose 8% to $64.1 billion—within its guided range of 8-9% for the year.

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Accenture’s deal wins, revenue guidance and managed services numbers are seen as a preview for Indian IT services firms as they are scheduled to report their FY24 second quarter results next month.

For fiscal 2024, the IT bellwether expects revenue growth to be in the range of 2% to 5% in local currency. Accenture follows a September-August financial year.

The fourth quarter revenue was dragged down by a 12% on year fall in communications, media and technology vertical to $2.71 billion.

Its managed services, or outsourcing, revenue was at $7.79 billion in the three-month period, up 10% on year. But its consulting vertical revenue decreased 2% on year at $8.20 billion.

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Accenture’s new bookings for the June-August period were at $16.6 billion – a 10% fall on year. The bookings were split 51% to 49% between consulting-based deals and managed services bookings.The company made generative AI bookings of $300 million in the last six months, up from the $100 million number by the end of May quarter.

“It (slowdown in communications, media and technology) is broad based across the globe and clients. We continue to see them and we know it is going to develop differently based on markets. Challenges in the US (are) more difficult and focussed on technology firms and communications and the complexion is different in Europe,” said Julie Sweet, chair and CEO of Accenture, during the post-earnings analyst call. We expect improvements over the course of the year at a different pace depending on the market, she added.

“In terms of addressing it, we will continue within that industry to help them cut costs, work on customer services and invest in more network capabilities. We are also pivoting our business to higher areas of growth,” she added.

The company said the average deal size in generative AI deals is around $1 million on average but it is leading clients to “look harder” in terms of digital core, data migration type of engagements.

Its operating margin for the quarter was at 12% after a 270 basis points contraction compared to last year.

Accenture expects operating margin for FY24 to be 14.8-15%.

Accenture’s deal wins, revenue guidance and managed services numbers are seen as a preview for Indian IT services firms as they are scheduled to report their FY24 second quarter results next month.

Indian IT firms, which start reporting their financials from the second week of October, are expected to report flat revenue numbers but total contract value numbers may be bumped due to large deals won by the tier I firms.

India’s second-largest software firm, Infosys pegged a 1-3.5% revenue growth for FY24 – its lowest in at least a decade. Its crosstown rival Wipro expects a fall of 2% to a 1% growth in revenue in the quarter ending September.

Accenture’s voluntary attrition remained flat at 13% on a sequential basis. The company’s headcount was up 951 on a net basis during the quarter to 732,819 employees. It had announced layoff of 19,000 employees during the earnings announcement after the quarter ended February.

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