Accenture's Earnings Beat Gets Overshadowed By Pressured IT Spending

Last Thursday, Accenture plc ACN is the latest from the IT sector to flag the industry pressures as its latest quarter revenue came short of expectations. Meanwhile, International Business Machines Corporation IBM general manager of Asia Pacific, Paul Burton, spoke today, expressing his belief that there is a $10 trillion productivity to be reaped from AI if it is leveraged correctly. IBM is more focused on upgrading business operations with AI technology as opposed to merely offering a generally accessible tool. IBM aims to empower its clients to become AI creators so that with the help of IBM, their clients can use AI in a smart and trusted way. Back in May, IBM CEO Arvind Krishna stated that he expects about 7,800 back-office jobs at IBM to be replaced by AI over the next five years but that the potential for new work and job improvement will outweigh these downsides. On September 18th, IBM committed to providing AI training for two million workers, specifically from underrepresented communities, by the end of 2026.

Unfortunately for Accenture, its earnings beat was overshadowed by the revenue miss and lower than expected guidance that pressured the stock 5% on Thursday. However, its stock rose 14% over the past 12 months, bringing the company market valuation of nearly $200 billion as it paves its way forward towards responsible AI innovations.

Fiscal Fourth Quarter And Annual Highlights

For the quarter that ended on August 31st , bookings fell 10% YoY to $16.6 billion despite consulting bookings surprisingly grew 1% but managed services contracted nearly 20%.

The IT consulting and outsourcing company reported revenue rose 4% but the consulting business which accounts for 51% of the revenue contracted 2% with particularly weakened demand from communications, media and tech industries with revenue dropping as much as 12%. The Dublin-based company made a net income of $2.15 per share. Adjusted earnings amounted to to $2.71 per share, translating to a 4% rise.

For the full year, Accenture made a profit of $6.87 billion, or $10.77 per share on the back of $64.11 billion in revenue.

Fiscal First Quarter Guidance And 2024 Outlook

For the undergoing November quarter, Accenture guided for revenue in the range between $15.85 billion to $16.45 billion.

The fiscal 2024 did not ease concerns about the weakened IT spending with the guidance of 2% to 5% revenue growth, with the mid-range being below analyst estimates of $67.2 billion which translate to 4.6% growth. Full-year adjusted earnings per share are expected to be in the range of $11.97 to $12.32, also coming short of estimates of $12.45.

Weathering The Slowdown

Unlike standalone consultancies or outsourcing firms, Accenture made itself into a one-stop shop as it goes beyond making IT strategies for its clients by supporting coders, designers and marketing throughout their execution paths. Accenture continues its expansion into digital marketing, blockchain, cloud computing services and cybersecurity products, while boosting its AI with the planned $3 billion investment.

DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.