5 months ago • 2 mins
What’s going on here?
Accenture, the American tech consulting (and soon-to-be AI) behemoth, announced some unexpectedly strong quarterly earnings on Thursday.
What does this mean?
Accenture earns its crust by offering brains-for-hire to firms planning major system revamps, and over time it’s evolved into a top-tier adviser for cutting-edge tech endeavors. So with mega-trends like cloud computing still flying high, and corporate clients almost universally gung ho about artificial intelligence, it wasn’t a total surprise that the firm’s quarterly revenue and profit swept past analysts’ forecasts. With just one quarter of its financial year left to go, then, Accenture was able to fine-tune its earnings prediction for the rest of the year, which wound up looking brighter than before.
Why should I care?
The bigger picture: Another AI play.
Accenture announced this month that it’ll invest $3 billion – roughly half of its cash reserves – in AI. So over the next three years, the company’s game plan is to recruit hotshots in the field and develop new solutions for clients. If that gambit works, Accenture’s “bookings” – a yardstick investors use to forecast future revenue – could get a serious lift from clients keen on its AI offerings. After all, there’s probably a serious high-tech skills war brewing right now: if Accenture can snag the top talent, it might become more of a money-making machine for shareholders.
For markets: Remember the cost cycle, not just the revenue cycle.
Investors are all abuzz about AI’s revenue potential, but they might be forgetting to take stock of the cost factor. Take Microsoft: it’s pegged as an AI victor, but it hasn’t detailed the capital costs its robo-jaunts involve (think servers and equipment). And Accenture? Well, despite being a low-capital-expenditure people business, its AI expansion could squeeze profit margins. So, while the attention-grabbing tech might be a revenue bonanza, remember: firms have to shell out on pickaxes before they can hope to strike gold.
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