Accenture, a global professional services company, has announced strong revenue growth for the year 2024, exceeding expectations. This growth can be attributed to the increasing demand for their service that helps businesses integrate artificial intelligence (AI) tools into their operations. The news has led to a surge in Accenture’s stock, rising more than 6%.
Accenture’s generative AI business, which focuses on automating operations to save costs and boost productivity, saw a significant jump in new bookings quarter-over-quarter, with a growth rate of about 50%. This outperformed their other core business areas, such as consulting and outsourcing services for companies transitioning to the cloud. It is worth noting that analysts had anticipated slow demand for these services due to plateauing enterprise spending.
In a conference call with analysts, Accenture CEO Julie Sweet emphasized the role of their AI services in driving cost reduction and creating opportunities for companies. She stated, “GenAI is acting as a catalyst for companies to more aggressively go after costs … which creates significant opportunity for us.”
The company’s new bookings, which indicate the value of customer contracts with a spending commitment, reached $21.06 billion for the third quarter, up from $17.25 billion the previous year. Of this, $900 million was attributed to their GenAI services, a substantial increase from the prior quarter’s $600 million. This brings the total for the year to over $2 billion.
While the overall near-term demand remains somewhat weak, it is not deteriorating. The strong outsourcing bookings are particularly noteworthy, indicating that demand for significant transformation projects remains intact, according to Jefferies analyst Surinder Thind.
In terms of future expectations, Accenture forecasts annual revenue growth between 1.5% and 2.5%. This is slightly higher than analysts' previous expectations of 1.6%. However, the company has flagged a negative foreign-exchange impact of 0.7% for the fiscal year ending in August. In terms of earnings, third-quarter revenue of $16.47 billion fell slightly short of estimates, while adjusted profit per share of $3.13 also missed expectations.
Accenture’s strong performance comes at a time when some of its competitors, such as Tata Consultancy Services and Infosys, have faced challenges due to weak spending by U.S. and European clients.
In conclusion, Accenture’s focus on AI integration services has proven to be a valuable asset, driving strong revenue growth in 2024. With their generative AI business experiencing significant growth and a positive outlook for outsourcing bookings, the company is well-positioned for continued success in the evolving landscape of technology and business operations.
Use the share button below if you liked it.