We recently compiled a list of the 10 Best Information Technology Services Stocks to Buy. In this article, we are going to take a look at where Accenture Plc (NYSE:ACN) stands against the other information technology services stocks.
Information technology (IT) services are a key component of the broader IT market, which also includes services, devices, enterprise software, and data center systems. By 2023, global IT spending had surged to over $1.3 trillion. Regionally, North America and Asia were projected to account for 66% of global IT expenditure in 2022. Meanwhile, IT services spending in Latin America has consistently held a 6% share since 2019. Cloud computing is one segment of the broader IT market that is experiencing robust growth, with end-user spending anticipated to exceed $590 billion by 2023. Projections from Mordor Intelligence indicate an increase from $0.68 trillion in 2024 to an estimated $1.44 trillion by 2029, reflecting a compound annual growth rate (CAGR) of 16.4%. This upward trend is expected to persist, with the market value approaching $2.5 trillion by 2032. These figures highlight the increasing adoption and utilization of cloud solutions across various industries.
On another front, the advent of 5G technology has led companies to establish networks on their premises. According to Ericsson, global 5G subscriptions are projected to exceed 5.6 billion by the end of 2029, accounting for 60% of all mobile subscriptions. Set to replace 4G by delivering ultra-fast speeds and significantly reduced latency, 5G is expected to become the leading mobile access technology by 2028. In Q1 2024 alone, 5G subscriptions surged by 160 million, bringing the total to 1.7 billion.
According to Gartner’s latest forecast, worldwide IT spending will reach $5.06 trillion in 2024, marking an 8% increase from 2023. This revised growth rate is up from the previous quarter’s estimate of 6.8%, setting the stage for IT spending to exceed $8 trillion well before the decade’s end. Additionally, spending on data center systems is anticipated to experience a significant growth surge, rising from 4% in 2023 to 10% in 2024, largely driven by preparations for generative AI. Speaking on this, John-David Lovelock, Distinguished VP Analyst at Gartner, said the following:
“Spending on IT services is projected to grow by 9.7%, surpassing $1.52 trillion and becoming the largest market tracked by Gartner. Enterprises are increasingly unable to compete with IT service firms in attracting talent with critical IT skill sets. As a result, there is a rising need for investment in consulting services over internal staffing. This year marks an inflection point, with more spending on consulting than on internal staff for the first time.”
Moreover, the AI industry has seen significant growth, with global funding doubling to $66.8 billion by 2021. According to a report by Precedence Research, the market will grow to approximately $2,575.2 billion by 2032, reflecting a CAGR of 19% from 2023 to 2032. Additionally, PwC suggests that AI could contribute around $15.7 trillion to the global economy by 2030, surpassing the current combined output of China and India. This contribution is expected to consist of $6.6 trillion from increased productivity and $9.1 trillion from effects related to heightened consumption.
Our Methodology
To identify the best information technology services stocks to buy now, we utilized Insider Monkey’s extensive database, which tracks 920 hedge funds as of Q1 2024. We selected the information technology services stocks that had the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Accenture Plc (NYSE:ACN)
Number of Hedge Fund Holders: 57
Accenture Plc (NYSE:ACN) stands as one of the largest IT services companies globally, offering a wide range of services and solutions across various IT domains, including data, infrastructure, automation, Cloud, security, supply chain, and more.
During its third quarter fiscal 2024 earnings call, Accenture Plc (NYSE:ACN) reported steady growth and strategic investments. The company posted $16.5 billion in revenue, a 1.4% increase in local currency despite a 1% decline in US dollars. Operating margins saw a slight improvement to 16.4%, and free cash flow remained strong at $3 billion. The company’s new bookings were particularly impressive, showing 22% growth in U.S. dollars and 26% growth in local currency, totaling $21.1 billion. A key growth driver was the company’s focus on large-scale transformations, especially in artificial intelligence, with its GenAI business achieving $2 billion in sales year-to-date.
Following the earnings report, TD Cowen slightly adjusted its outlook on Accenture Plc (NYSE:ACN), lowering the price target to $293 from $294 while maintaining a Hold rating on the shares. Despite performance that exceeded concerns, with bookings particularly strong in Management Services (MS), the firm noted that contract durations are lengthening and organic growth trends remain subdued.
Hedge fund sentiment towards Accenture Plc (NYSE:ACN) was positive in the first quarter, according to Insider Monkey’s database of 920 hedge funds. By the end of the period, 57 hedge funds reported owning stakes in Accenture Plc (NYSE:ACN), down slightly from 58 in the previous quarter.
Overall ACN ranks 7th on our list of the best information technology services stocks to buy. You can visit 10 Best Information Technology Services Stocks to Buy to see the other information technology services stocks that are on hedge funds’ radar. While we acknowledge the potential of ACN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ACN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
