Accenture CIO predicts strong demand for AI will drive growth in 2024

Accenture on Thursday forecast better-than-expected full-year revenue growth, buoyed by surging demand for its services that help companies integrate artificial intelligence tools into their operations.

Accenture's shares rose more than 6 percent after falling about 19 percent this year on market expectations that rising interest rates would force companies to cut spending and weaken demand for its IT services.

Accenture's generative AI business, which helps companies reduce costs and improve productivity through business automation, saw new orders increase by about 50% compared to the previous quarter.

That far outpaced growth in Accenture's other core business as a go-to provider of consulting and outsourcing services to companies moving operations to the cloud, and analysts expect demand for those services to slow as corporate spending plateaus.

Indian rivals Tata Consultancy Services and Infosys have warned that their businesses are being hurt by weak spending by U.S. and European clients.

“GenAI is creating a huge opportunity for us as it acts as a catalyst for companies to be more aggressive in reducing costs,” Accenture CEO Julie Sweet said on a conference call with analysts.

The company's new bookings, a measure of the value of customer contracts with spending commitments, increased to $21.06 billion in the third quarter from $17.25 billion in the same period last year.

Of this, $900 million in new orders were for GenAI services, up from approximately $600 million in the same period last year, bringing the total for the full year to more than $2 billion.

“While near-term demand is generally weak, it does not appear to be worsening. It is worth noting that outsourcing order intake is strong, suggesting that demand for large transformation projects remains strong,” said Surinder Shinde, an analyst at Jefferies.

The company now expects full-year revenue to grow by 1.5-2.5 percent, above the 1.6 percent analysts had expected, according to LSEG data. The company had initially forecast growth of 1-3 percent but warned on Thursday of a negative impact of currency fluctuations of 0.7 percentage points in the financial year to August.

Third-quarter revenue was $16.47 billion, below the $16.53 billion expected, and adjusted earnings per share were $3.13, below the $3.15 expected.