Earnings Digest | Can AI help Accenture regain its glory?

Yesterday, $Accenture PLC(ACN)$ , the world's largest management consulting firm, released its third-quarter results of fiscal 2024 , covering the period ending May 31st, and its stock price soared 7.29%!

Revenue

In terms of revenue, Accenture's FY24Q3 revenue was $16.47 billion, down 0.6% year-on-year:

But based on management's guidance, the next quarter's revenue is expected to be between $160.5 billion and $166.5 billion, beating analysts' estimates of $164.3 billion, representing a 2.8% growth.

Looks like Accenture's fundamentals are turning a corner!

In addition, their new order bookings are amazing! FY24Q3 saw $210.6 billion in new orders, a whopping 22.1% increase year-on-year, the highest in six quarters! This indicates that Accenture's future revenue growth rate or will be a step up!

AI-Driven

Not only are traditional business demands recovering, but Accenture's AI revenue is also seeing significant changes.

According to management, new orders for generative AI in FY24Q3 reached $900 million, and total bookings for the fiscal year exceeded $2 billion, achieving $500 million in revenue. In FY 2023, Accenture's revenue from generative AI was only $100 million!

Since the AI explosion, with ChatGPT from OpenAI and other big tech giants like $Meta Platforms, Inc.(META)$ and $Alphabet(GOOG)$ $Alphabet(GOOGL)$ jumping on the bandwagon, it's been a dream run for companies like $NVIDIA Corp(NVDA)$ in hardware and the semiconductor industry, including TSMC.

But as AI technology matures and costs come down, the application side is bound to explode. And just like the internet, AI will empower every industry! Accenture, being a major player in enterprise transformation, is certainly going to benefit from this trend!

Looking at their revenue history, Accenture has always been stable, rarely seeing a dip. So, their lackluster stock performance in recent years wasn't due to any fundamental issues; it was just a valuation correction.

Remember when their P/E ratio was sky-high at 44 times? Now, after the correction, it's at a reasonable 25.8 times.

Therefore, with new orders and AI revenue booming, Accenture's fundamentals are definitely turning a corner, and their stock price is reflecting that.

In the future, as AI continues to penetrate, Accenture will surely regain its glory!