Accenture's (ACN -0.50%) stock jumped 7% on March 23, after it posted its latest earnings report. For the second quarter of fiscal 2023, which ended on Feb. 28, the IT services giant's revenue rose 5% (9% in local currency terms) to $15.8 billion and exceeded analysts' expectations by $220 million. Its adjusted earnings rose 6% to $2.69 per share and also cleared the consensus forecast by $0.19.

Accenture's growth rates were stable, but its stock is still trading more than 30% below its all-time high from December 2021. Should investors buy it today as a turnaround play?

An IT professional works on a server in a data center.

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Another quarter of decelerating growth

Accenture provides its IT services to five main sectors: Communications, Media, and Tech (19% of its revenue in the first half of fiscal 2023), Financial Services (19%), Health and Public Services (19%), Products (30%), and Resources (14%). The growth of all five markets cooled off significantly in local currency terms over the past year.

Revenue Growth (YOY) by Segment

Q2 2022

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Communications, Media, and Tech

32%

31%

23%

11%

0%

Financial Services

25%

24%

22%

13%

10%

Health and Public Services

21%

19%

19%

15%

15%

Products

34%

31%

25%

15%

9%

Resources

25%

26%

21%

21%

16%

Total

28%

27%

22%

15%

9%

Data source: Accenture. YOY = Year-over-year. Local currency terms.

Inflation, rising rates, and geopolitical challenges forced many companies to rein their spending on IT services, but its health, public service, and utilities markets -- which are more resistant to those macro headwinds -- remained relatively resilient.

It expects its revenue to rise 8% to 10% in local currency terms for the full year, which represents a slight reduction from its prior outlook for 8%-11% growth and marks a significant slowdown from its 26% growth in fiscal 2022.

It expects the currency headwinds to shave about five percentage points off its top line growth, which implies its reported revenue will rise only 3% to 5% for the full year. Analysts currently expect 4% growth.

Optimizing its spending as its growth slows down

Like many other tech companies, Accenture is reining in its spending as its revenue growth cools off. That's why its adjusted operating margin expanded 10 basis points year over year to 13.8% in the second quarter.

For the full year, it reiterated its previous forecast -- which called for its adjusted operating margin to expand 10 to 30 basis points, to a range of 15.3%-15.5%. It also announced that it would lay off about 19,000 people, or 2.5% of its current workforce, over the next 18 months to hit that target. And it raised its full-year free cash flow forecast from a range of $7.7 billion to $8.2 billion to a new range of $8.0 billion to $8.5 billion -- but that's still lower than its free cash flow of $8.8 billion in fiscal 2022.

Accenture expects its adjusted EPS to rise 7% to 9% for the full year, which also matches analysts' expectations for 7% growth. At $272, Accenture trades at 24 times the midpoint of that forecast, which is a reasonable valuation for a blue-chip tech giant.

For example, Microsoft (MSFT -3.58%), which is expected to generate just 2% earnings growth in fiscal 2023 (which ends this June), trades at 26 times forward earnings. Globant (GLOB 1.06%), which is growing faster than Accenture by focusing on the higher-growth niche of digital transformation services, trades at 65 times forward earnings.

Accenture's long-term prospects still look bright

During Accenture's latest conference call, CEO Julie Sweet said that "the ongoing volatility and uncertainty in the macro environment is making it even clearer to clients that they need to change more, not less." She adde that "all strategies continue to lead to technology, particularly cloud, data, AI and security," and that its clients will remain focused on "executing compressed transformations to achieve lower cost, stronger growth, more agility, and greater resilience faster."

That bright long-term outlook, along with the scale and diversification of its IT services, makes Accenture a promising digital transformation play for patient investors. It probaby won't generate massive gains over the next few years, but it's still a rock-solid investment that has a good shot at outperforming the market and many other tech stocks.