Accenture warns of FX hit amid strong demand for IT services

Accenture warns of FX hit amid strong demand for IT services

By Shafi Mehta

(Reuters) – Accenture Plc warned on Thursday that a stronger dollar this year would hurt its 2023 financial results, even as strong demand for digital offerings helped its IT services drive top quarterly earnings estimates.

US companies with large overseas operations such as Microsoft (NASDAQ:) and Salesforce (NYSE) have in recent months reported losses from the strongest US currency in two decades.

Accenture (NYSE:), which generates more than half of its revenue from outside the US, expects a 6% dollar hit in fiscal year 2023. A strong US currency usually eats away at the profits of companies that convert foreign currencies into dollars.

The company’s first-quarter revenue forecast of $15.20 billion to $15.75 billion was also lower than the $16.07 billion analysts had expected, according to Refinitiv data.

While annual revenue forecasts were slightly above estimates, earnings visibility broadly lagged behind Wall Street expectations.

However, the demand for IT services remains strong from companies looking to expand their digital presence, thus protecting the sector to some extent.

Accenture, whose offerings include cloud and security services, announced $18.40 billion in new bookings for the fourth quarter ended August 31, its second-highest level ever.

Analysts have warned that the economic slowdown could weaken IT budgets and cracks are already starting to appear after “calculated” customer spending forced Salesforce to lower its forecast.

β€œThe concern for Accenture and other IT consulting firms is the increasing signal that new IT deployments are on hold,” said Eric Bradley, chief strategist at research firm ETR.

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β€œThe initial forecast for total spending in 2023 is currently 5.9% growth for the next year, which is a muted number compared to recent years.”

Quarterly revenue was largely in line with estimates, while earnings beat expectations. Accenture raised its dividend by 15% to $1.12 per share and said it would buy back shares worth an additional $3 billion.

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