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Push to Digital Helps Accenture Beat Revenue Estimate

September 29, 2016, 6:04 PM UTC
09 Sep 2011, Jouy-en-Josas, France --- Pierre Nanterme, Chief executive of Accenture's Financial Services operating group, attends the French employers' body MEDEF union summer forum on the campus of the HEC School of Management in Jouy-en-Josas, near Paris, September 2, 2011. REUTERS/Charles Platiau (FRANCE - Tags: BUSINESS HEADSHOT ) --- Image by © CHARLES PLATIAU/Reuters/Corbis
Photograph by Charles Platiau — Reuters/Corbis

Consulting and outsourcing services provider Accenture reported better-than-expected quarterly revenue and profit as its investments to boost digital and cloud services pay off.

Shares of the company (ACN) were up 5.4% on Thursday and was the biggest boost on the S&P 500. They touched a record high of $124.96 earlier in the session.

Increasing demand for digital services from businesses has forced IT service providers to beef up their security, cloud and analytics services. Accenture said it would continue with its push to the services which it refers to as “The New.”

“We will continue to invest in high-growth areas … with a particular focus on digital, cloud and security services,” CEO Pierre Nanterme said in a statement.

In fiscal year 2016, the company invested more than $930 million in acquisitions, 70% of which in “The New.” The company spent about $800 million on acquisitions last year.

Accenture said in September it would buy three companies: DayNine, a partner of human resources software provider Workday Inc, Octo Technology, a technology consultancy firm based in France, and Kurt Salmon, a unit of Management Consulting Group Plc.

Accenture is relying on digital services to gain market share from rivals including IBM and India’s Infosys and Tata Consultancy Services.

Revenue from Accenture‘s “The New,” which includes digital, cloud and security-related services, accounted for 40% of total revenue in fiscal year 2016, up from about 30% in the previous year.

“I think what differentiates Accenture from its competitors is…they were very early to make digital investments…and (that) is now bearing fruit,” Edward Jones analyst Bill Kreher said.

Accenture said it expected first-quarter revenue between $8.40 billion and $8.65 billion. Analysts on average had expected $8.59 billion, according to Thomson Reuters I/B/E/S.

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Net income rose to $1.13 billion, or $1.68 per share, in the fourth quarter ended Aug. 31 from $788.13 million, or $1.15 per share, a year earlier.

Excluding items, the company earned $1.31 per share, beating the average analyst estimate by 1 cent.

Revenue rose 7.6% to $8.49 billion, above the estimated $8.43 billion.