Accenture's AI business takes center stage in quarterly results beat

(Reuters) - IT services major Accenture unveiled a $4 billion share buyback on Thursday, closing the fourth quarter with better-than-expected results thanks to strong demand for its services that help businesses adopt generative AI technology.

 

Accenture’s generative AI business has been outpacing the growth in its other core businesses, as organizations look for automation to curtail costs and improve efficiency.

 

Generative AI bookings have shown robust quarter-on-quarter acceleration for the past four quarters, reaching a total of $3 billion for the year.

 

Shares of Accenture rose 3.3% before the bell, rebounding from a near 4% decline over the year. The tech-heavy Nasdaq, on the other hand, rose 20.4% this year.

 

Excluding items, the company earned $2.79 per share, beating estimates of $2.78 per share, according to LSEG data.

 

However, the company’s forecast for growth between 3% and 6% missed the midpoint of the analysts’ average estimate of 5.9% growth.

 

While analysts expect a turnaround in IT services, the expectations for next year remain modest. Analysts at JP Morgan earlier said they were not as bullish for the sector as they were this time last year, adding that clients will continue to withhold discretionary spending on projects.

 

Ahead of Accenture’s results, Morgan Stanley said that overall IT services demand will likely be generally slower than expected in the coming quarters.

 

Indian IT services company Tata Consultancy Services slightly beat its first-quarter revenue estimates and said it is "too early" to predict sustained growth in future quarters.

 

Dublin-based Accenture recently shifted its primary promotion date from December to June. While the company claims this change aligns with better client planning and demand visibility, analysts at Morgan Stanley said this raises concerns about near-term recovery.

 

(Reporting by Rishi Kant in Bengaluru; Editing by Janane Venkatraman and Tasim Zahid)