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Accenture's Underwhelming Prediction For The IT Sector Foreshadows Additional Suffering

Accenture's Underwhelming Prediction For The IT Sector Foreshadows Additional Suffering
Accenture's Thursday quarterly sales projection, which fell short of Wall Street expectations, fueled worries about declining IT investment and caused its shares to drop more than 5%.
Julie Sweet, the CEO, echoed comments made by Cognizant Technology Solutions earlier this month when she stated that clients were "holding back on small deals" due to the uncertain economic environment.
Revenue for the current quarter was predicted by Accenture to be in the $15.75 billion to $16.35 billion range. Refinitiv data shows that analysts anticipate $16.35 billion in revenue on average.
The company attributed the weakness to the fact that it does business with the tech, media, and communications sectors, which have substantially cut back on spending recently to deal with sluggish growth. In the third quarter, that group's revenue decreased by 8%.
The largest market for Accenture, North America, underperformed as well, with revenue growth there dropping to a nearly three-year low of approximately 2%.
A recovery in the United States had not materialised as anticipated, according to Indian outsourcing juggernaut Tata Consultancy Services, and had even gotten worse.
After one of the most aggressive policy tightening cycles in history, IT companies may be in for more pain as U.S. Federal Reserve Chairman Jerome Powell hinted on Wednesday at the possibility of additional interest rate increases.
Early trading saw a 2.5% decline in Cognizant's stock while a 0.5% decline was seen in Infosys' U.S. listed shares.
In line with expectations, Accenture's overall third quarter revenue increased by 3% to $16.56 billion. The adjusted profit of $3.19 per share above the $3.04 per share consensus.
Sweet stated that, in contrast to other tech leaders, she does not anticipate generative AI to be a significant growth driver in 2019, focusing instead on businesses completing their cloud migrations.
"We feel really good about the bigger (digital) transformational deals continuing next year because there's so much work to do," Sweet said.

Christopher J. Mitchell

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