Accenture forecast takes hit from Iran war, shares tumble 14%
The logo of Accenture is displayed on a building, on the first day of the annual meeting in Davos, Switzerland, January 15, 2024. REUTERS/Denis Balibouse
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June 18 : Accenture forecast quarterly sales below Wall Street estimates on Thursday as the Iran war hampers its consulting business in the Middle East and beyond, sending its shares down more than 14 per cent and sparking an industry selloff.
The IT consulting giant took a $400 million hit to its Middle East business from the conflict in the third quarter and warned of “more impact in the fourth,” the latest evidence of how the war has upended corporate fortunes worldwide.
“The indirect impact really started in the last few weeks,” CEO Julie Sweet said on a post-earnings call. “It’s not clear how fast things will change, particularly because some of the industries are dealing with kind of longer-term issues.”
The automotive sector where Accenture has a large presence, for instance, was already struggling before higher gas prices from the conflict piled on more pressure, Sweet said.
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Geopolitical and economic uncertainty have in recent months hit demand for IT projects, while concerns that autonomous AI tools could displace traditional software services have weighed on valuations across the consulting sector.
Shares of rivals Infosys, Cognizant, Capgemini and IBM slid between 5.5 per cent and 10.8 per cent as Accenture also lowered its annual sales expectations.
FOCUS ON M&A, INDUSTRIAL CYBERSECURITY
To cushion the consulting hit, Accenture is making a big bet on industrial cybersecurity. It announced acquisitions totaling $4.18 billion on Thursday in a combined deal that will expand its $10 billion cybersecurity business.
It will take a majority stake in industrial cybersecurity firm Dragos and fully acquire asset intelligence company runZero and device security specialist NetRise.
While cybersecurity budgets remain focused on IT systems, greater internet connectivity and AI use are making factories, power grids and other critical infrastructure more vulnerable to hackers, drawing attention to tools that protect them.
The deals, expected to close in August or September pending regulatory approvals, will add companies with combined annual recurring revenue of $208 million to Accenture’s offerings.
Accenture said it plans to spend $9 billion on acquisitions this year, up from $5 billion, as it leans harder into AI, cloud and data, areas where clients are concentrating spending on large projects tied to cost savings and growth.
The Dublin, Ireland-based company said it now expects annual revenue growth between 3 per cent and 4 per cent, down from its previous forecast of 3 per cent to 5 per cent.
It forecast fourth-quarter revenue between $17.75 billion and $18.4 billion, below analysts’ average estimate of $18.47 billion, according to data compiled by LSEG.
In the third quarter, the company’s new bookings fell about 2 per cent to $19.3 billion. Its revenue rose 6 per cent to $18.72 billion, missing estimates of $18.75 billion.
Source: Reuters
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