Outsourcing and consulting services provider Accenture Plc cut its full-year outlook last week, citing a pullback in spending by its consulting business clients.
Clients are slowing the pace and level of spending on existing contracts, said Accenture, whose rivals include Cognizant Technology Solutions Corp and Infosys Ltd.
The company expects outsourcing revenue to moderate, and consulting revenue to decline modestly or grow slightly in the current quarter, David Roland, who takes over as chief financial officer this week, said on a conference call with analysts.
Accenture now expects adjusted earnings of $4.18 to $4.22 per share on revenue growth of 3 to 4 percent in local currency for the year ending Aug. 31.
The company in March had forecast adjusted annual earnings of $4.24 to $4.32 per share on a revenue growth rate below the midpoint of the 5-8 percent range it previously expected in local currency.
The outlook assumed a negative currency impact of 1.7 percent, compared with a negative impact of 1 percent expected earlier.
While there has been moderate improvement in discretionary spend in 2013, there was still softness in the consulting segment, particularly in Europe, Barclays analyst Darrin Peller wrote in a note.
Accenture’s consulting net revenue dropped 2 percent to $3.9 billion in the three months ended May 31. Revenue from the business, which Accenture expected to return to growth, fell for the fourth straight quarter.
Consulting bookings were almost $400 million lower than the company expected. Smaller contracts, which convert to revenue faster, declined.
“It [consulting] definitely didn’t improve the way we expected and we see more softness in that part of the business in consulting smaller deals,” Accenture Chief Executive Pierre Nanterme said on the call.
Outsourcing net revenue rose 4 percent to $3.3 billion in the quarter.
Accenture’s results could have been worse without the strength in outsourcing, Edward Jones technology analyst Josh Olson told Reuters.
Net revenue rose 0.6 percent to $7.2 billion.
Net income rose to $874.1 million, or $1.21 per share, in the third quarter, from $762.8 million, or $1.03 per share, a year earlier.
Excluding items, the company earned $1.14 per share.
Analysts on average had expected earnings of $1.13 per share on revenue of $7.42 billion, according to Thomson Reuters.
(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Joyjeet Das)