Finance chiefs at U.S. technology companies are highly optimistic about their prospects for 2018, projecting an average 12% revenue gain compared with last year. That’s the most enthusiastic forecast tech CFOs have issued since BDO began conducting its annual technology outlook survey in 2008.
“Quantum leaps” in technological progress have led to new business opportunities, behaviors, and ways of thinking, according to BDO’s survey report. At the same time, “increased public scrutiny over the industry’s actions have inspired leaders to reach new levels of accountability and transparency,” BDO wrote.
Taken as a whole, tech CFOs were most optimistic about U.S. sales. More than one-third (34%) of those surveyed said they believe the United States will experience the most technology-sector growth, followed by China (26%), India (24%), and Latin America (10%).
Not that there aren’t challenges in store. “U.S. technology companies can expect an even greater barrage of competing demands this year, as the full impact of last year’s policy changes — from changing trade agreements to shifts in immigration policy to sweeping tax reform — come to light,” said Aftab Jamil, global leader of BDO’s technology practice.
“Nevertheless, the industry’s resilience is not to be underestimated, nor is the community’s ability to transform setbacks into opportunities,” Jamil added. “We expect 2018 to be a metamorphic year for tech, as leaders strive to balance their desire for economic success with the political and economic factors at play.”
Among the 100 CFOs that BDO surveyed, 84% expected higher revenue in 2018 — good news, considering that almost two-thirds of participants cited revenue growth as their biggest business priority for this year.
That was significantly so among public-company finance chiefs, 75% of whom said beefing up the top line was their top goal, compared with 56% of private-company CFOs. The abundance of investment dollars available to private companies today, easing the pressure to turn a profit, may explain part of that gap, BDO said.
On the IPO front, the surveyed finance leaders expect another bountiful year in 2018. Last year there were 37 initial public offerings in the technology field that raised a total of $9.9 billion, versus 21 IPOs that raised $2.9 billion in 2016. For this year, 60% of those surveyed predicted that stock performance for new stock offerings will improve, while only 11% said they expected it to decline.
The IPO market is notoriously unpredictable, though. Asked to name the greatest threat factors, 35% of those surveyed pointed to domestic and global political uncertainty. Next were performance of recent tech IPOs (29%), concerns about valuations (20%), and global market volatility (16%).
An even more robust year was envisioned for mergers and acquisitions, with 72% of survey respondents saying they expected tech deal volume to increase. Among those, 35% said they believed such growth will be “significant.”
Meanwhile, the survey revealed a perhaps surprising level of resistance to the most advanced developing technologies. A vast majority (85%) of the CFOs said they have no plans to invest in artificial intelligence this year, and 58% said the same about Internet of Things technologies. Such investments should grow “dramatically” over the next few years, BDO said.
U.S. immigration policy remains a key concern for the technology industry. From 2007 through 2017, almost 2.1 million H-1B visa petitions were filed by foreign nationals seeking computer-related jobs, according to U.S. Citizenship and Immigration Services. Those hoping for employment in all other fields combined totaled only 1.4 million.
Since President Trump announced the ending of DACA last September, more than 100 companies, including tech giants Google, IBM, Facebook, and Dropbox, have filed amicus briefs in support of plaintiffs in five ongoing cases aiming to reinstate the DACA program.
Those concerns were among the many factors that led to more than half (51%) of the surveyed technology CFOs to cite recruiting or retaining workforce talent as their greatest personal challenge in 2018, BDO said.