Accenture Plc on Thursday announced that it would cut about 19,000 jobs or 2.5 per cent of its workforce over 18 months and lowered its annual revenue projections for FY23, sending tremors across the sector.
The company trimmed the upper end of its FY23 revenue growth band to be in the 8-10 per cent range in local currency, from 8-11 per cent earlier. It also estimated a foreign exchange impact of negative 4.5 per cent.
The company also forecast its Q3 revenue below street expectations in the range of $16.1 billion and $16.7 billion. Analysts were expecting revenue of $16.64 billion, according to Refinitiv data.
The decision to cut jobs came as a shock. Justifying its decision, the company said, “We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our services and solutions, given that compensation costs are the most significant portion of our operating expenses.”
Accenture’s actions come at a time when the US and European banks are seeing a crisis due to the relentless hike in interest rates and contributing to a stalling of the growth momentum in the IT services sector.
Last month, another IT major Cognizant had indicated muted growth in its deals pipeline and its first-quarter revenue forecast was below market expectations.
Indian IT giants such as TCS, Infosys, Wipro, HCL Technologies, Mphasis and LTIMindtree have exposure to some of the troubled banks.
Kotak Institutional Equities had said earlier that the banking woes in the US and Europe would likely impact growth for Indian IT in H1 FY24, and bring down the overall growth for FY24.
“Current woes in the banking sector can impact sequential growth by 1-2 per cent in Q1 FY24,” it added.
Omkar Tanksale, Research Analyst, Axis Securities, said, “For a few quarters, we can anticipate a slight slowdown. Companies may face some delays in ongoing projects or IT spending for newer projects.”
Devang Bhatt, lead analyst at IDBI Capital, said, “Accenture’s reduction of the outlook isn’t a positive sign. Although its consulting business has taken a hit, its outsourcing business has made a decent performance, which is relevant to draw conclusions for the Indian IT sector.”