Key Takeaways
- Cognizant shares are up about 7% on Thursday after Accenture’s fiscal fourth-quarter revenue of $18.68 billion beat the top of Accenture’s own guidance.
- Accenture’s results suggest big companies are spending on IT services again, which is good news for Cognizant and EPAM Systems.
- Accenture booked a record $84.5 billion of new work for the year, which pushes back on fears that AI will shrink demand for consulting.
- Cognizant’s third-quarter report will show whether that demand is reaching it.
Cognizant (CTSH) shares are up about 7% on Thursday thanks to Accenture (ACN)‘s good news.
Accenture posted its fiscal fourth-quarter results before Thursday’s open, and its stock is up about 18%. EPAM Systems (EPAM) is up about 7% right alongside Cognizant.
The rally makes sense to me. Accenture is the industry’s bellwether, and its quarter says big companies are spending on IT services again.
What exactly happened
Accenture beat on every number that matters:
- Revenue of $18.68 billion, above the top of its own $17.75 billion to $18.40 billion guidance and the $18.04 billion analysts expected
- Earnings per share of $3.29, against a $3.18 consensus
- $22.2 billion of new bookings, bringing the year to a record $84.5 billion
Accenture Chair and CEO Julie Sweet pointed to “broad-based growth.” Looks like the AI-driven white collar apocalypse still hasn’t materialized.
Why this matters for Cognizant and EPAM
The big worry hanging over IT services stocks has been that AI would shrink demand for consulting and outsourced coding. Accenture’s quarter pushes back on that. Cognizant sells much of the same work: running, modernizing, and moving large companies’ systems to the cloud.
(As you can see, analysts aren’t predicting Cognizant is about to collapse either.)
If Accenture’s clients are spending big, there’s even a case that those estimates for Cognizant are too low.
EPAM builds custom software for big clients, and it has faced the same AI worry. That makes Accenture’s quarter just as relevant to it.
What’s next
The catch is that this whole move rests on somebody else’s results. Cognizant should report its third quarter in early November, with EPAM in late October. Those reports, and especially any change to full-year guidance, will show whether Accenture’s demand is idiosyncratic or if it reflects a broader trend.
Valuation is the other thing to watch. Even after Thursday’s jump, Cognizant is far below where it’s historically been valued.
Bottom line: Accenture just showed that clients are writing big checks for IT services, and Cognizant sells much of that work. Of course, AI could still change what clients spend over time, and one strong quarter is one quarter.
So what is Cognizant stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
