IT Increasingly Seen As Safe Bet Amidst AI Craze

In investors’ eyes, artificial intelligence (AI) is still shining brightly. This led to a “disconnect” on Thursday, when Accenture (ACN) released its third-quarter earnings report, showing that the company missed analyst estimates for sales and earnings. They reported $16.47 billion in sales, when $16.54 billion was expected, and earnings per share (EPS) was $3.13, compared to the $3.16 estimate. This was also down from the $16.57 billion in sales and $3.19 per share from the prior year’s quarter. Nevertheless, the stock rose by 7.79% to $307.23. What inspired investors was Accenture’s AI news—$900 million in new generative AI bookings for Q3 and $2 billion in for the fiscal year to date.   

Who Is Accenture

Accenture is a global information technology (IT) and consulting firm serving clients in 120 countries. They help mid-sized and enterprise organizations and governments to develop a digital base, improve operations, accelerate growth, and boost services. Accenture provides application, infrastructure, and business process outsourcing, technology and systems integration, analytics and AI. With over 140 purchases in the past four years, acquisitions are central to Accenture’s growth strategy. The company recently announced plans to acquire Fibermind to broaden its fiber and mobile 5G network services. Other recent investments include Parsionate (data consultancy) and Soko (Brazilian creative agency). They are also collaborating with Bath & Body Works to elevate the brand through advanced technologies like AI and generative AI.    

Why IT Matters In The AI Era

Accenture recognizes that IT and AI work together symbiotically. AI-driven automation enables IT businesses to automate operational processes, enhancing efficiency, problem-solving, and the user experience. Analysts are anticipating a slight YoY decline in EPS, although they are “cautiously optimistic” about the company’s prospects. Ramsey El-Assal at Barclays pointed out that the company’s weak Q2 performance and lowered sales outlook tempered expectations. But he also notes the strong bookings and better-than-expected margins.

The consensus rating is a moderate buy, with 9 Buy ratings and 8 Hold ratings. The average price target is $348.24, suggesting 22.04% upside potential.

Neither Julie Stoller nor Stocks.News have positions in this company.