Accenture To Lay Off 19,000 Workers, Pares Revenue Guidance
Accenture says more than half of the 19,000 layoffs will affect staff at its non-billable corporate functions.
Accenture Plc has lowered its revenue growth guidance for the fiscal ending Aug. 31, 2023, and announced layoffs as client spending takes a backseat in the aftermath of a banking crisis in the U.S. and Europe.
However, its second-quarter earnings topped estimates. Revenue at the world's most valuable IT services firm rose 5.1% year over year to $15.81 billion. That compares with the $15.56 billion consensus estimate of analysts tracked by Bloomberg.
Operating margin stood at 12.3% as against 13.7% in the year-ago period.
Earnings per share stood at $2.39 as against $2.54 in the year-ago period.
Gross margin stood at 30.6% as against an estimated 30.4%.
Revenue Breakup
Technology revenue fell 9.66% year-on-year to $2.88 billion. (Estimate: $3.2 billion)
BFSI revenue rose 4.6% year-on-year to $3 billion. (Estimate: $2.98 billion)
Product revenue rose 9% year-on-year to $4.72 billion. (Estimate: $4.61 billion)
Resources revenue rose 11% year-on-year to $2.18 billion. (Estimate: $2 billion)
New bookings for the second quarter stood at a record $22.1 billion, with consulting bookings of $10.7 billion and managed services bookings of $11.4 billion.
"Our strong financial results this quarter again demonstrate that our ability to bring together industry, functional, and technology expertise as well as managed services continues to differentiate us with our clients," Julie Sweet, chairperson and chief executive at Accenture, said in a statement.
"Our record bookings reflect the confidence and trust that our clients have in us to create value and help them transform at speed."
Incoming Pain
The Dublin-based company expects to clock revenues of $16.1–16.7 billion in the March–May period, an increase of 3–7%. That compares with an earlier estimate of 16.59 billion. For the full year, it expects revenue to grow 8–10% from 8–11% previously.
Accenture plans to let go 19,000 employees, or 2.5% of its 738,000-strong workforce, more than half of whom are in non-billable corporate functions. The IT firm, which recorded $244 million in business optimisation costs in the second quarter, estimates $1.2 billion for severance and $300 million for consolidation of office space. A total of $800 billion of this will come in the 2023 fiscal and the rest in the next fiscal.
"We are taking steps to lower our costs in fiscal year 2024 and beyond while continuing to invest in our business and our people to capture the significant growth opportunities ahead," Sweet said.
The company's attrition rate stood at 12% in the second quarter, as compared to 18% in the year-ago period.
India Impact
Accenture's quarterly results and guidance are seen as a benchmark for India's $227 billion IT industry, which is staring at a bumpy start to the 2024 fiscal.
The banking crisis in the U.S. and Europe—the two biggest markets for Indian IT firms—is likely to slow down the pace of discretionary spending by clients in the near term, according to analysts.
"We expect a growth slowdown in FY24 to play out in the form of a weak March 2023 quarter, followed by a moderate uptick in Q1 FY24 and normalisation in Q2 FY24," Kotak Institutional Securities said in a report. "Current woes in the banking sector can impact sequential growth by 1–2% in Q1 FY24."