Accenture (ACN 0.33%) posted its latest earnings report on June 22. For the third quarter of fiscal 2023 (ended May 31), the IT service provider's revenue rose 3% year over year (5% in local currency terms) to $16.6 billion and exceeded analysts' expectations by $80 million. Its adjusted EPS grew 14% to $3.19 and also cleared the consensus forecast by $0.19.

Those headline numbers were stable, but Accenture's stock price still dropped 2% after the report, and it remains 24% below its all-time high from December 2021. Should investors still buy this blue-chip tech stock as the bulls look the other way?

An IT professional works on a server.

Image source: Getty Images.

Another quarter of decelerating growth

Accenture provides IT services to five major industries: communications, media, and tech (17% of its third-quarter revenue), financial services (19%), health and public services (20%), products (30%), and resources (14%). However, the growth of all five of those markets cooled off significantly over the past year in local currency terms.

Revenue Growth (YOY) by Segment

Q3 2022

Q4 2022

Q1 2023

Q2 2023

Q3 2023

Communications, Media, and Tech

31%

23%

11%

0%

(8%)

Financial Services

24%

22%

13%

10%

5%

Health and Public Services

19%

19%

15%

15%

14%

Products

31%

25%

15%

9%

6%

Resources

26%

21%

21%

16%

12%

Total

27%

22%

15%

9%

5%

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

Accenture attributed that slowdown to the macro headwinds, which drove many organizations to curb their spending on technological upgrades. During the third-quarter conference call, CEO Julie Sweet said the "macro environment continues to be uncertain" with "lower than expected small deal sales" -- particularly in its strategy, consulting, and systems integration services -- as well as "lower-than-expected results in the communications, media, and high-tech industry group."

Accenture expects that deceleration to continue in the fourth quarter with a 3% year-over-year decline to 1% growth in revenue on a reported basis. For the full year, it expects its revenue to grow just 4%-5% on a reported basis and 8%-9% in local currency terms. That would represent a significant slowdown from fiscal 2022 when its revenue rose 22% on a reported basis and 26% in local currency terms.

Focusing on cost-cutting measures and buybacks

As Accenture's revenue growth cools off, it's focusing on boosting its margins and EPS with aggressive cost-cutting measures and buybacks. It already laid off about 19,000 employees (about 2.5% of its workforce) earlier this year, automated away another 13,000 jobs, then reskilled and redeployed those employees into other roles.

Those efforts boosted Accenture's adjusted operating margin by 20 basis points year over year (and 250 basis points sequentially) to 16.3% in the third quarter. Its free cash flow (FCF) also grew 56% year over year to $3.1 billion, which enabled it to return $1.5 billion ($789 million in buybacks and $708 million in dividends) to its investors. It still has another $3.5 billion remaining in its current buyback authorization.

That's why Accenture's adjusted earnings are growing at a much faster rate than its total revenue. It expects that trend to continue with 8%-9% adjusted earnings growth for the full year. At $307 a share, Accenture trades at about 27 times that estimate, which is a reasonable valuation relative to most of its industry peers. Microsoft -- which is growing at a slightly slower rate than Accenture -- trades at 30 times forward earnings. Globant, a smaller IT player that is growing faster than Accenture -- trades at 65 times forward earnings.

Accenture also raised its dividend by 15% during the quarter. However, its new forward yield of 1.4% still won't impress any serious income investors, especially when plenty of other blue-chip tech stocks are paying much higher dividends.

Is it the right time to buy Accenture's stock?

Accenture's growth will likely accelerate again as the macro environment improves, and it should still have plenty of room to expand over the long term as more organizations upgrade their cloud, data, artificial intelligence, and security services. But it also isn't cheap enough for value-seeking investors, nor is it expanding rapidly enough for growth-oriented investors.

In other words, Accenture is a safe stock to buy right now, but it probably won't generate market-beating gains over the next few quarters. I personally own some shares of Accenture, but I'd rather accumulate shares of other tech companies for the time being instead of settling for Accenture's middle-of-the-road growth rates and valuations.