Accenture Plc lowered its annual revenue and profit forecasts and decided to cut about 2.5% of its workforce, or 19,000 jobs, the latest sign that the worsening global economic outlook was sapping corporate spending on IT services.
More than half of the jobs to be cut will be in its non-billable corporate functions, Accenture said on Thursday, sending its shares up 6.4%.
Since late last year, the tech sector has laid off hundreds of thousands employees due to a demand downturn caused by high inflation and rising interest rates.
Rival Cognizant Technology Solutions (CTSH.O) last month pointed to “muted” growth in bookings, or the deals IT services firms have in the pipeline, in 2022 and forecast quarterly revenue below expectations.
IBM Corp (IBM.N) and India’s top IT services firm Tata Consultancy Services (TCS.NS) have also flagged weakness in Europe, where the Ukraine war has affected client spending.
Accenture now expects annual revenue growth to be between 8% and 10%, compared with its previous projection of a 8% to 11% increase.
Earnings per share is expected in the range of $10.84 to $11.06 compared with $11.20 to $11.52 previously. The company expects to incur $1.2 billion in severance costs through fiscal 2023 and 2024.
“Companies remain focused on executing compressed transformations,” Chief Executive Julie Sweet said in a post-earnings call referring to how businesses were trying to become leaner in the turbulent economy.
A survey of more than 1,000 IT decision makers by U.S.-based Enterprise Technology Research said they plan to reduce their 2023 budget growth. The growth expectations are now 3.4%, down from 5.6% increase captured in October 2022.
“In short, the data indicates a very difficult environment ahead for consulting firms,” said Erik Bradley, chief engagement strategist at the technology market research firm.