Accenture forecast takes hit from Iran war, shares tumble over 17%

By Anhata Rooprai

June 18 (Reuters) - 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 17% 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.

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.

"Accenture's results suggest demand is becoming increasingly concentrated around targeted AI investments while broader consulting and transformation spending remains under pressure," said Phil Fersht, HFS Research's chief analyst.

Shares of rivals Infosys, Cognizant, and IBM slid between 5.7% and 10.5%, while Capgemini closed down 8.9% 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 a 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% and 4%, down from its previous forecast of 3% to 5%.

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% to $19.3 billion. Its revenue rose 6% to $18.72 billion, missing estimates of $18.75 billion.

(Reporting by Anhata Rooprai and Aditya Soni in Bengaluru; Editing by Maju Samuel)