What's going on?
Global management consultancy firm Accenture reported its latest quarterly results on Thursday. The business is on cloud nine with digital and cloud computing now bringing in the majority of its cash. To the future!
What does this mean?
Revenue in Accenture’s latest quarter grew 11% more than the same time last year, driven by growth in its core consulting business #billables. And the company’s been future-proofing itself: over the last 12 months, its digital, cloud and security-related services grew by 25% and now make up 60% of its total business.
Cloud computing is growing fast. Instead of managing lots of big servers (which takes manpower and maintenance), everything is stored and organized over the internet for a lower fee (usually paid by monthly subscription). And Accenture has gone all in on cloud services over the past few years, making over 70 acquisitions and spending more than $3.4 billion since 2015. As a consulting firm, Accenture can advise clients to use cloud computing and, as a cloud service provider, offer the solution itself – bagging a steady income stream at the same time.
Why should I care?
For markets: Accenture needs to accentuate its growth.
Despite beating analyst expectations, Accenture’s stock was down nearly 2%. The company’s targets for the year ahead (that it also released on Thursday) weren’t as high as hoped (with the usual suspects to blame, Brexit and the trade war among them), leaving investors a tad underwhelmed.
The bigger picture: A stormy cloud might be brewing.
Cloud computing can be a pretty attractive business. It generates a steady, reliable stream of cash (via those monthly subscriptions) – but there’s a big fight for market share. Amazon, out ahead with over 30% of the market, has been cutting prices to win more customers – taking some short-term pain on profit for the long-term gain of selling new features to those customers in the future (new tech, like artificial intelligence and the internet of things, uses cloud computing).