US-based IT giant Accenture released its financial earnings report for the first quarter of the 2022-23 financial year. The IT services firm follows a September-August financial year. The revenue stood at $15.7 billion, an increase of 5 percent in US dollar terms and 15 percent in local currency from the corresponding period a year ago.

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Zack Equity research estimated the quarter’s revenue for Accenture to be at $15.6 billion.

Accenture's Earnings Per Share was at $3.08, an 11 percent increase from $2.78 for the first quarter of fiscal 2022. For EPS, the Zacks Consensus estimate predicted that to be at $2.91 per share. Accenture has beaten the estimate by over 5 percent.

Further, Accenture has also updated its outlook. The company has raised earnings per share to between $11.20-$11.52. It has further maintained its expectation that revenue will grow by 8 to 11 percent in local currency. Accenture also expects a negative 5 percent foreign exchange impact.

For their last quarter, Accenture reported earnings of $2.60 per share — beating EPS estimates by 1.90 percent. In the preceding three quarters too, Accenture beat EPS estimates, but the margin has been reducing, as per NYSE data below.

The gross margin (gross profit as a percentage of revenues) for the quarter was 32.9 percent — flat from the corresponding period a year ago.

Despite revenue being estimated to grow, experts say the company could see an impact due to the currency volatility, which was seen in the last quarter.

Impact of currency volatility

The quarter's revenues were negatively affected by foreign exchange by approximately 9.5 percent, compared with 8.5 percent last quarter After adjusting for foreign exchange impact, the company guided for quarterly revenues between $15.05 billion and $15.60 billion.

In the financial results for the fourth quarter, Accenture's guidance for the first quarter was at $15.20-15.75 billion. The guidance, according to analysts worldwide, was lower than estimated. The analysts' average estimate was $16.07 billion, as per data from Refinitiv.

The cut in guidance by Accenture was mostly due to IT spending reductions in the midst of August's unexpectedly hot inflation statistics and the effects of a stronger dollar.

Since Accenture's third-quarter results, currency headwinds have gotten worse, with the US dollar at a two-decade high versus a basket of currencies, and up over 17 percent so far in 2022 amid rate hikes by the US Federal Reserve and increased geopolitical concerns.

This has already affected firms with significant overseas operations including Microsoft, Salesforce and IBM. With quarterly financial results for the companies going down or being below the estimates resulting in companies cost-cutting through measures like layoffs.

Also read: Accenture expects revenue growth to slow down to 10-14% in September-November

Profits for IT companies that convert foreign currencies into dollars are often badly impacted by a strong currency. For the first time since mid-2002, the dollar index, which compares the dollar's value to a basket of six currencies, including the yen, euro, and pound sterling, in September, reached a high of 111.79. Currently, the dollar index is at 103.940.

Accenture too had mentioned in its earning call for the last quarter that the forecast reflects the assumption of about 8.5 percent negative foreign-exchange impact.

Why are Accenture earnings important to India?

Indian IT giants like Wipro, Infosys, Tata Consultancy Services, Tech Mahindra and HCL Technology keep a close eye on Accenture's quarterly results because the earnings of US-based IT company are often seen as an indicator of the performance of the Indian IT sector. Accenture also outsources a lot of work from Indian IT companies — hence, its results are always on the radar.

Accenture’s results on guidance for cloud adoption also open up further opportunities for Indian IT companies and provide a sustained demand environment.

Meanwhile global brokerage firm Nomura has estimated a slowdown for the Indian IT sector in 2023. "While tech adoption continues to rise across industries, we expect a slowdown in the next 12 months compared to the past two years of strong spends… Our FY24 revenue estimates are lower than consensus numbers,” brokerage firm Nomura said in its latest report.

Also read: IT growth to further slow down in 2023 but these two tech giants may fare better: Nomura

First Published:Dec 16, 2022 1:41 PM IST