Accenture's (ACN) services demand remains "muted" but is not worsening, while recent acquisitions and lower bookings expectations create a "less demanding setup" for the company, Morgan Stanley said in a report Monday.

The investment bank said its Q2 CIO survey from July showed expected IT services budget growth slowing, even as overall IT budget growth edged higher. Artificial intelligence spending continues to crowd out some discretionary IT services projects, according to the report.

Accenture remains "well positioned" for recovery because of its scale, enterprise relationships and strength in strategic consulting, the firm said. The company's recent acquisitions should also help expand its AI expertise and contribute inorganically to nearly 2% to fiscal 2027 growth, the report said.

The firm trimmed the company's fiscal 2027 revenue estimate to $76.11 billion from $76.48 billion and now expects constant-currency growth of 3.5%, down from 4%. It also reduced its fiscal 2028 growth forecast to 4.5% from 6%, anticipating a more gradual recovery in services spending.

Morgan Stanley maintained an equalweight rating on Accenture and raised its price target to $175 from $130.

Price: 190.88, Change: +6.98, Percent Change: +3.80