March 24, 2023
Accenture Plc announced its plan to cut 2.5% of its workforce, equivalent to 19,000 jobs, after lowering its annual revenue and profit forecasts. This move indicates that the worsening global economic outlook has taken a toll on corporate spending on IT services. Accenture said that more than half of the jobs to be cut will be in its non-billable corporate functions.
The news of the job cuts sent Accenture’s shares up by 6.4%. The tech sector has been laying off hundreds of thousands of employees since late last year due to a demand downturn caused by high inflation and rising interest rates.
Other IT services firms such as Cognizant Technology Solutions and IBM Corp have also pointed to weakness in Europe, where the Ukraine war has affected client spending.
Accenture has revised its annual revenue growth projections to be between 8% and 10% from its previous estimate of an 8% to 11% increase. Earnings per share are now expected to be in the range of $10.84 to $11.06, compared with $11.20 to $11.52 previously. The company also expects to incur $1.2 billion in severance costs through fiscal 2023 and 2024.
During the post-earnings call, Chief Executive Julie Sweet stated that “companies remain focused on executing compressed transformations” in an effort to become leaner in the turbulent economy. A survey conducted by US-based Enterprise Technology Research of more than 1,000 IT decision-makers revealed that they plan to reduce their 2023 budget growth expectations to 3.4%, down from a 5.6% increase captured in October 2022.
The sources for this piece include an article in Reuters.
