Accenture said that amid the overall inflationary environment and rising interest rates, there’s a drop in the levels of business confidence among its clients.
On Thursday, March 23, tech consulting giant Accenture (NYSE: ACN) announced that it is planning to cut 2.5% of its workforce, or 19,000 jobs worldwide. The company said that the decision comes in the wake of uncertain global economic conditions as it also trims down its yearly revenue outlook.
Accenture Is Cutting Its Workforce
The company on Thursday said that more than half of the job cuts will be in its non-billable corporate functions. This led to a surge in the ACN stock which jumped by 7.26% by the end of Thursday’s trading session.
The high inflationary environment and rising interest rates have been a spoiler for the tech sector which has laid off hundreds of employees over the last year due to the downturn in demand. Accenture is now expecting the annual revenue growth to be between 8-10% while the previous projection was for 8-11%.
At the same time, the earnings per share are likely to be in the range of $10.84 to $11.06 in comparison to the previous expectations of $11.20 to $11.52. Through the fiscal 2023 and 2024, the company is expecting to incur $1.2 billion in severance costs.
Commenting on the attrition in its press release, Accenture explains: “For the second quarter of fiscal 2023, attrition, excluding involuntary terminations, was 12%, down from 18% in the second quarter of fiscal 2022″. The company added:
“Our results of operations are affected by economic conditions, including macroeconomic conditions, the overall inflationary environment and levels of business confidence. There continues to be significant economic and geopolitical uncertainty in many markets around the world, which has impacted and may continue to impact our business, particularly with regard to wage inflation and volatility in foreign currency exchange rates”.
Speaking on the development, Chief Executive Julie Sweet said:
“Companies remain focused on executing compressed transformations”.
IT Sector Under Pressure
The recent macro environment has not only impacted Accenture but companies across the tech sector. Last month, Accenture rival Cognizant Technology Solutions pointed out at the “muted” growth in bookings, and other deals in the pipeline.
India’s Top IT services firm Tata Consultancy Services (TCS) also flagged weakness in Europe where client spending has dropped amid the war in Ukraine. US-based Enterprise Technology Research has recently conducted a survey of more than 1,000 IT decision-makers. The growth expectations have now dropped to 3.4% from the 5.6% last year in October 2022. Erik Bradley, chief engagement strategist at the technology market research firm said that “the data indicates a very difficult environment ahead for consulting firms”.