Accenture raises FY16 revenue target, but indicates slowing sequential growth for Q4

MUMBAI: Accenture raised growth target for its financial year ending August as it reported strong growth in the third quarter on Thursday.

The company, however, said growth weighted towards its consulting business and it might see some moderation in BFSI growth. Accenture expects net revenue growth of 9.5-10.5 per cent in local currency for FY16, compared with earlier expectations of 8-10 per cent growth. For the fourth quarter, Accenture expects revenue to grow 6-9 per cent in local currency to $8.25-8.5 billion.
The company reported a revenue of $8.4 billion for the third quarter, up 9 per cent from the previous year, beating its own forecast. But the company’s fourth quarter revenue forecast indicated a slowdown in sequential growth.

In sequential terms, Accenture’s revenue rose 6 per cent in the third quarter but the company’s fourth quarter revenue forecast implies a 1 per cent decrease to a 1 per cent increase in revenue. Analysts also questioned the deceleration of the company’s forward indicators, including hiring and mergers and acquisition.

Earlier this month, Infosys said it expected volatility in its revenue over the next few quarters, a comment that hit its share price.

Accenture also indicated that it might see some moderation in its banking and financial services business, on the back of more caution at banks. The company’s financial services business grew 10 per cent in US dollar terms in the third quarter.

"Banks, especially in Europe, need to rotate to the new technologies but their profit is also under pressure. So, they have to be cautious on costs. We are seeing that play out at some of our clients. So, we might see some moderation in BFSI in Europe," Accenture CEO Pierre Nanterme said on a post-earnings conference call.

Accenture said its revenue growth was weighted towards its consulting business. The outsourcing business grew just 4 per cent in the quarter. Nanterme said that would likely continue as the need to transform industries increased. "Four or five years ago, there was more growth in outsourcing because the need was for efficiency. But as industries transform, there is a need for innovation and that is more consulting led," Nanterme said.

Analysts have often said that Indian IT companies are weaker in the consulting business.