Accenture expects higher AI spending by clients as token costs fall

Accenture Plc. expects companies to spend more on automation tools as the costs of deploying them reduce, even as it passes more productivity benefits to clients.

While overall tech budgets have remained largely unchanged from last year, newer and cheaper AI models offer clients an incentive to spend more on AI, Julie Sweet, chief executive of the world's largest IT services company said.

“So, the way we think about the dynamic is, the more that token costs go down over the next couple of years, the more it's going to enable companies to use AI in more places and at scale. And to use AI, they need to change their processes, reinvent their work, build out that AI stack in order to really do it. And all of that is what clients are turning to us,” Sweet said at a post-earnings conference call.

Quick answers to key questions

•5 QUESTIONS

How is Accenture's revenue expected to grow in fiscal 2027?⌵

Accenture expects revenue growth of 3% to 6% in local currency for fiscal 2027.

Why do companies plan to increase their AI spending according to Accenture?⌵

Companies are expected to increase AI spending because newer and cheaper AI models offer incentives for broader usage, especially as token costs decrease.

What impact has AI had on Accenture's revenue and operations?⌵

AI has created predictable revenue deflation, but Accenture has offset this by providing more productivity and exploring new types of work.

How did Accenture’s fourth-quarter earnings compare to analysts' expectations?⌵

Accenture's fourth-quarter earnings surpassed analysts' expectations, reporting revenue of $18.7 billion, which exceeded estimates by about $660 million.

What are tokens in the context of AI as explained by Accenture?⌵

Tokens are the fundamental units of data processed by large language models, serving as the building blocks for AI to analyze and generate text, images, and software codes.

A token is the fundamental unit of data processed by large language models (LLMs) such as OpenAI’s ChatGPT or Anthropic’s Claude. They are essentially AI’s building blocks used to analyze and generate text, images and software codes.

Accenture's commentary comes on the back of AI advancements that have threatened to erode the revenue of tech services firms, as much of the work they handle can be automated by automation tools.

The management also added that AI-led revenue deflation, even though persistent, is now predictable.

“We are definitely giving more productivity due to AI, and overall, though, the impact has been steady. So, we're offsetting (revenue deflation) as we have in the past with new kinds of work, more scope,” she said.

The management’s upbeat commentary was reflected in its report card. Accenture closed the fiscal year ended August with $74.2 billion revenue, up 6% from the previous year. A little more than a fourth of its revenue growth came from its products business, which includes retailers, manufacturers and life sciences companies. Accenture earns almost a third of its overall business from these sectors.

Accenture's earnings cheered investors, with the company’s shares rising 22% on the New York Stock Exchange. Shares of Infosys and Wipro followed as well, gaining 9% and 8%, respectively.

Earnings were in line with its own estimates—the company ended with a 5% growth in local currency, in line with its June estimates. The company bounced back from a period of low new orders to report $84.5 billion in new orders, most of which came to its managed services business, which won more than half of them.

Accenture earnings also exceeded analyst expectations. According to a Bloomberg poll of 30 analysts, it was expected to report about $73.56 billion in revenue.

The company reported a net profit of $8.5 billion, up 8.8% from the preceding year. Profitability jumped as well, with the company reporting 15.4% in operating margins, up 70 basis points from a year earlier. One basis point is a hundredth of a percentage point. The management attributed this to better deal pricing and delivery efficiencies.

For now, the management expects demand to remain dynamic.

“We see backlog, we see the big deals from those large deals layering in. Our pipeline is solid and we see continued demand for those large deals. And then, as it relates to the macro overall, we expect that dynamic to continue. But with respect to discretionary spend at the top end of the range, we have allowed for a stable to slightly improving discretionary spend environment. While at the bottom, we allow for deterioration,” said Angie Park, chief financial officer of Accenture.

The company expects revenue growth between 3-6% in local currency this year, of which 2-2.5% is expected to come from acquisitions.

"They have beaten expectations. Uptick in small deals which are discretionary in nature, quick mobilization of contracts which implies faster deal conversions to revenue, and better performance of recent acquisitions and Accenture Federal business have contributed to these numbers, which were better-than-expected," said Karan Uppal, lead IT analyst at Phillip Capital.

Accenture's earnings and commentary are seen as a bellwether for India's IT services sector, with some of the country’s largest tech services firms including Tata Consultancy Services Ltd, Infosys Ltd, HCL Technologies Ltd and Wipro Ltd, announcing their second quarter results beginning next week. To be sure, Accenture follows a September-August fiscal calendar, compared to Indian IT’s April-March.

"Overall positive readthroughs for Indian IT companies—There is no further pressure on pricing and client spending is intact for digital core, data foundation and enterprise AI," Uppal of Phillips Capital said.

Significantly, the company expects the current fiscal year to be its most acquisitive ever. It expects about $8 billion in acquisitions this year, even as $3 billion is expected from cybersecurity acquisitions that were deferred to last month. The company spent about $4.9 billion on 17 acquisitions last year, its highest in two years.

In contrast, India's 13-largest tech services firms earning more than a billion dollars in revenue completed 19 acquisitions worth $5 billion between 1 September 2025 and 31 August 2026.

While automation poses a threat to people, Accenture's headcount jumped 5% from the preceding year to 814,391 employees, an increase of about 35,118 people. The management attributed this to new growth areas.

“We're experiencing a lot of demand in new areas, right? So, we're both upskilling and hiring in data and AI,” said Sweet, adding the company will hire more entry-level graduates in the current fiscal even as it hires fewer people overall.