Accenture cuts revenue guidance to 3-6% for Q3 FY20

Global information technology services and consulting firm Accenture has revised its guidance for the financial year 2019-20 downwards to 3-6% from 6-8% earlier, as the company expects its revenues in the third quarter to be hit by the Covid-19 pandemic.

Accenture follows the September to August calendar financial year, and on Thursday reported its financial earnings for the quarter ended February 29, 2020. The company met its guidance by reported revenues at $11.14 billion, higher by 7%, compared to $10.45 billion in the previous year.

The company witnessed a robust increase in new bookings, driven by high demand for digital, cloud and security related services. This, according to Mumbai-based brokerage Motilal Oswal, is impressive, given the nearly two months of Covid-19 disruption in the Asia Pacific region and almost a month of restricted global travel.  

The downgrade in Accenture’s revenue growth expectation will be driven more by the consulting segment rather than outsourcing operations, which is the consoling factor for Indian information technology companies, Motilal Oswal said in a statement.

In February, technology industry body Nasscom had said that for financial year 2019-2020, Indian information technology (IT) companies are expected to post a muted topline growth of 7.7% in reported terms, garnering revenues of $191 billion, slightly higher than the 7% growth in FY19. However, at the time, it had also said that the full impact of Covid-19 was still unknown.  

In constant currency terms, Accenture’s North America business grew 11% year-on-year, while Asia Pacific region went up 13% and Europe by a mere 2%, dragging down the overall growth.

The company’s revenues from the financial services segment went up 3%. Despite a strong growth in insurance, banking and capital markets remained modest due to overall weakness in Europe.

Accenture has not experienced any material disruption to its service delivery despite the travel restriction, as a significant portion of its workforce operates from remote locations, the brokerage said.  

“The revised revenue growth, margin guidance, and commentary around demand and supply are encouraging, especially in the context of the recent alarming increase in Covid-19 cases in major markets like the US, UK and Europe. This should partly calm the nerves of Indian IT investors about the potential disruption to operations, business continuity and new deal wins,” the broker firm said.

However, Accenture, in a separate statement, said that the Covid-19 crisis is rapidly evolving and has created a significant amount of uncertainty.