ACN
Earnings call · Feb 2025 (Q2 FY25)

Accenture Q2 FY25 earnings call ACN

Mar 20, 2025 Source

Executive summary

Accenture Q2 FY25 — Strong Bookings and GenAI Momentum Amidst Elevated Uncertainty

Accenture delivered strong Q2 FY25 results, driven by significant bookings and continued momentum in GenAI, with revenue at the high end of guidance. The company is navigating an elevated global economic uncertainty and specific headwinds in its federal business, which are reflected in its updated full-year outlook. Management emphasizes its diversified business model and strategic investments in high-growth areas like AI to drive future growth and client reinvention.

Highlights

5

  • Bookings of $20.9 billion, including 32 clients with quarterly bookings greater than $100 million.

  • Revenue of $16.7 billion, up 8.5% in local currency, at the top end of guidance.

  • GenAI new bookings of $1.4 billion and approximately $600 million in revenue.

  • Diluted EPS of $2.82, reflecting 2% growth over adjusted EPS last year.

  • Free cash flow of $2.7 billion.

Concerns

4

  • Operating margin contracted 20 basis points compared to adjusted operating margin last year.

  • Federal business negatively impacted by slowed procurement actions and contract reviews, representing 8% of global revenue and 16% of Americas revenue in FY24.

  • Elevated level of uncertainty in the global economic and geopolitical environment in recent weeks.

  • Gross margin for the quarter was 29.9% compared to 30.9% for Q2 last year, primarily due to higher subcontractor costs.

Guidance & targets

CategoryTargetConfidence
Q3 FY25 Revenue
$16.9 billion to $17.5 billion
high materiality
High
Full Fiscal Year 2025 Revenue Growth (Local Currency)
5% to 7%
high materiality
High
Full Fiscal Year 2025 Inorganic Contribution
a bit more than 3%
medium materiality
High
Full Fiscal Year 2025 Acquisitions Investment
$2 billion to $3 billion
medium materiality
High
Full Fiscal Year 2025 Operating Margin
15.6% to 15.7%
high materiality
High
Full Fiscal Year 2025 Effective Tax Rate
22.5% to 24.5%
medium materiality
High
Full Fiscal Year 2025 Diluted Earnings Per Share
$12.55 to $12.79
high materiality
High
Full Fiscal Year 2025 Operating Cash Flow
$9.4 billion to $10.1 billion
medium materiality
High
Full Fiscal Year 2025 Property and Equipment Additions
approximately $600 million
medium materiality
High
Full Fiscal Year 2025 Free Cash Flow
$8.8 billion to $9.5 billion
medium materiality
High
Full Fiscal Year 2025 Free Cash Flow to Net Income Ratio
1.1 to 1.2
low materiality
High
Full Fiscal Year 2025 Capital Return
at least $8.3 billion
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Americas
Revenue grew 11% in local currency. Growth was led by Banking & Capital Markets, Industrial, Health, and Consumer Goods, Retail & Travel Services. Revenue growth was driven by the United States.
—11%——
EMEA
Revenue grew 8% in local currency. Growth was led by Public Service, Life Sciences, and Consumer Goods, Retail & Travel Services. Revenue growth was driven by the United Kingdom.
—8%——
Asia Pacific
Revenue grew 1% in local currency. Driven by growth in Insurance and Utilities, partially offset by a decline in chemicals and natural resources. Revenue growth was led by Japan, partially offset by a decline in Singapore.
—1%——
Consulting
Consulting revenues for the quarter were $8.3 billion, up 3% in U.S. dollars and 6% in local currency.
$8.3 billion3% in U.S. dollars, 6% in local currency——
Managed Services
Managed services revenue were $8.4 billion, up 8% in U.S. dollars and 11% in local currency, driven by double-digit growth in technology managed services, which includes application managed services and infrastructure managed services and high single-digit growth in operations.
$8.4 billion8% in U.S. dollars, 11% in local currency——
Industry X
Industry X grew high single digits this quarter.
—high single digits——
Song
Song grew double digits this quarter.
—double digits——
Cloud
Cloud saw double-digit growth this quarter.
—double-digit growth——
Security
Security had very strong double-digit growth.
—very strong double-digit growth——

Operational metrics

Non-GAAP EPS
$2.82 2% growth
Q2 FY25

Reflects 2% growth over adjusted EPS last year.

Non-GAAP operating margin
13.5% 20 basis point decrease
Q2 FY25

Compared to adjusted operating margin in Q2 of last year. Includes significant investments in business and people.

Non-GAAP gross margin
29.9% compared to 30.9%
Q2 FY25

Compared to 30.9% for the second quarter last year. Primarily due to higher subcontractor costs and impact of business optimization actions.

Cash and investments balance
$8.5 billion compared with $5 billion
as of Feb 28

Compared with $5 billion at August 31.

Revenue growth
5%
Q2 FY25

Total revenue for the quarter was $16.7 billion.

Revenue growth
8.5%
Q2 FY25

Total revenue for the quarter was $16.7 billion, at the top end of guided range.

FX impact on revenue
-3% compared with -2.5% estimate
Q2 FY25

Compared with a negative 2.5% estimate provided last quarter.

Sales and marketing expense
10.1% compared with 10.3%
Q2 FY25

Compared with 10.3% for the second quarter last year.

General and administrative expense
6.3% compared to 6.9%
Q2 FY25

Compared to 6.9% for the same quarter last year.

Effective tax rate
20.4% compared with 18.8%
Q2 FY25

Compared with an adjusted effective tax rate of 18.8% for the second quarter last year.

Days services outstanding
48 compared to 50 days last quarter and 43 days in Q2 FY24
Q2 FY25

Compared to 50 days last quarter and 43 days in the second quarter of last year.

Share repurchases
$1.4 billion
Q2 FY25

Repurchased or redeemed 4 million shares for $1.4 billion at an average price of $361.16 per share.

Share repurchase authority remaining
$5 billion
as of Feb 28

Approximately $5 billion of share repurchase authority remaining as of February 28.

Dividend paid
$1.48 15% increase
Q2 FY25

Quarterly cash dividend of $1.48 per share for a total of $929 million, representing a 15% increase over last year.

Dividend declared
$1.48 15% increase
Q3 FY25

Board of Directors declared a quarterly cash dividend of $1.48 per share to be paid on May 15, a 15% increase over last year.

Acquisition spend
$500 million
H1 FY25

Invested almost $500 million in the first half of the year, primarily attributed to 11 acquisitions.

Investments in business
$250 million
Q2 FY25

Over $250 million deployed primarily across 6 strategic acquisitions and invested in people.

Training hours
15 million
Q2 FY25

Approximately 15 million training hours this quarter designed to help bring the latest solutions and technology to clients.

Data and AI workforce
72,000
Q2 FY25

Continuing progress against goal of 80,000 by the end of FY26.

Accenture Federal Services revenue share
8%
FY24

Federal represented approximately 8% of global revenue in FY24.

Accenture Federal Services revenue share
16%
FY24

Federal represented approximately 16% of Americas revenue in FY24.

Utilization
91%
Q2 FY25

Utilization continues to be 91%, which is exactly the desired range.

Organic growth
2% to 4%
FY25

Organic growth for the full year is now expected to be 2% to 4%.

Consulting growth
mid-single-digit range growth
FY25

Consulting is expected to be in the mid-single-digit range growth for the full year.

Managed services growth
high single digits
FY25

Managed services is now expected to be at high single digits for the full year.

Industry KPIs

MetricValueDetails
Headcount dso48 days days
Large customer cohorts32 clients
Bookings tcv book to bill$20.9 billion USD
Genai ai book of business$1.4 billion USD

Orderbook & backlog

New bookings $20.9 billion Q2 FY25

flat in local currency, 3% decrease in U.S. dollars

Includes 32 clients with quarterly bookings greater than $100 million.

Book-to-bill 1.3 Q2 FY25

Overall book-to-bill ratio.

Consulting bookings $10.5 billion Q2 FY25

Consulting book-to-bill of 1.3.

Managed services bookings $10.4 billion Q2 FY25

Managed services book-to-bill of 1.2.

GenAI new bookings $1.4 billion Q2 FY25

New bookings specifically for GenAI.

Product announcements

ProductTypeDetails
AI Refinery platformupdate
mySecurity platformupdate
LearnVantageexpansion

Deals & partnerships

Telstra Accelerate data and AI roadmap, simplify and modernize data systems, set up comprehensive AI foundation, deploy advanced AI solutions, evolve data and AI Academy.

Partnering with Telstra, Australia's leading telecommunications company, to create a new joint venture to accelerate its data and AI roadmap and fast track the business into a new era of AI-driven reinvention.

Multinational food processing company Reinvent as a data-driven organization, revolutionize enterprise, end-to-end supply chain and frontline sales function, deliver productivity using AI/GenAI assets.

Working with a multinational food processing company to help reinvent themselves as a data-driven organization, revolutionizing their enterprise, including supply chain and sales, with AI/GenAI assets.

World's largest auto manufacturer Modernize security operations, protect critical IT systems, implement modern threat detection and response platform, build new GenAI security engine.

Helping one of the world's largest auto manufacturers modernize their security operations to protect the company's critical IT systems and stay ahead of the rapidly evolving security landscape.

Repsol Advance digital program, scale agentic AI, reinvent key business operations, deploy customized AI agents across functions (planning, forecasting, customer service), upskill employees. more than a decade (existing client)

Deepening partnership with Repsol, a leading multi-energy company and a client for more than a decade, to advance its digital program and scale agentic AI.

KION Use AI-powered digital twins to create smarter, safer, and more adaptable warehouses, integrate autonomous robots with human workers on an AI-driven platform.

Working with KION, a global leader in supply chain solutions, to use AI-powered digital twins to create smarter, safer and more adaptable warehouses.

Multinational conglomerate (communications industry) Streamline and optimize media strategy and operations for mobile division, implement new digital platform, reduce number of media agencies to Accenture Song, leverage automation and AI.

Partnering with a multinational conglomerate in the communications industry to streamline and optimize their media strategy and operations for their mobile division.

AOX Acquisition to invest in Industry X and supply chain capabilities.

Acquired AOX in Germany to invest in Industry X and supply chain capabilities.

Staufen AG Acquisition to invest in Industry X and supply chain capabilities.

Acquired Staufen AG in Germany to invest in Industry X and supply chain capabilities.

IQT Group Acquisition of a managed services provider for utility providers.

Acquired IQT Group in Italy, a managed services provider, which will help utility providers build and modernize integrated electricity and water networks.

Halfspace Acquisition to lead in GenAI.

Acquired Halfspace in Denmark to help clients in the Nordics region leverage and scale AI to make better, more informed decisions faster.

Altus Consulting Acquisition to scale faster in Financial Services.

Acquired Altus Consulting in the U.K., a leader in consulting and digital transformation, to enable scaling faster in Financial Services.

Precipient Purchase of a digital twin technology platform for banks.

Purchased a digital twin technology platform for banks from Precipient, a Singapore-based fintech company with deep expertise in banking technology transformation.

Capital programs

Strategic deployment in D&A underway $2 billion to $3 billion

Goal to strategically deploy $2 billion to $3 billion in D&A (presumably acquisitions and other investments) this fiscal year.

Risks & headwinds

Federal Business Uncertainty ongoing

Federal represented approximately 8% of global revenue and 16% of Americas revenue in FY24.

Mitigation:Accenture believes its work is mission-critical and sees major opportunities over time to help consolidate, modernize, and reinvent the federal government.

Elevated Global Economic and Geopolitical Uncertainty recent weeks

Not quantified, but described as 'elevated level of what was already a significant uncertainty'.

Mitigation:Leveraging agility, deep client and ecosystem relationships, and leading position in GenAI and technology. Diversified across markets, industries, and types of work.

Operating Margin Contraction Q2 FY25

20 basis point decrease compared to adjusted operating margin in Q2 of last year.

Mitigation:Managing business with rigor and discipline, focusing on pricing, contract delivery, supply and demand management, and digitizing operations. Still expects 10-20 bps expansion for FY25.

Competitive Market Q2 FY25

Pricing was 'relatively stable' but the market 'continues to be very competitive'.

Mitigation:Focused on managing pricing and contract profitability. Leveraging diversification and leadership in GenAI.

What to watch in Q3 FY25

Federal Business Impact

next quarter
Current Slowed procurement actions and contract reviews negatively impacting sales and revenue.
Target Stabilization or clarity on federal contract status and procurement pace.

Why it matters

The federal business represents a significant portion of Americas revenue, and ongoing uncertainty could impact overall growth.

While we continue to believe our work for federal clients is mission-critical, we anticipate ongoing uncertainty as the government's priorities evolve and these assessments unfold.

Q&A highlights

Are clients hitting the pause button on new initiatives or changing the pace of converting pipeline to backlog/revenue, outside of the U.S. Federal business?

Management stated there has been no change overall in client behavior outside of the U.S. Federal business. They acknowledged that the elevated uncertainty is recent and discussions are ongoing, potentially leading to faster cost-cutting initiatives.

“for us, there's really -- we've seen no change overall.”

asked by Jason Kupferberg · answered by Angie Park

2 min read 6 chapters

Detailed narrative

Client Reinvention and GenAI as a Catalyst

Clients are prioritizing large-scale transformations, with GenAI serving as a key catalyst for reinvention. Accenture's strategy focuses on building digital cores with integrated AI, driving growth in areas like customer experience, core operations, supply chain, and Industry X. The company is helping clients achieve both cost efficiency and growth through these initiatives, as evidenced by $1.4 billion in GenAI new bookings and approximately $600 million in revenue this quarter.

Strategic Investments and Talent Development

Accenture invested over $250 million in 6 strategic acquisitions this quarter and dedicated 15 million training hours to upskill its workforce. The data and AI workforce grew to approximately 72,000, progressing towards a goal of 80,000 by the end of FY26. These investments support bringing cutting-edge solutions to clients and developing marketable skills, reinforcing Accenture's position as a leader in the evolving technology landscape.

Federal Business Headwinds

Accenture Federal Services, which represented 8% of global revenue and 16% of Americas revenue in FY24, faces challenges due to slowed new procurement actions and a General Services Administration (GSA) directive for federal agencies to review and potentially terminate non-mission-critical contracts. This situation creates ongoing uncertainty, though Accenture sees long-term opportunities in modernizing the federal government.

Ecosystem Partnerships and AI Scale

Accenture collaborates closely with ecosystem partners to drive GenAI adoption, leveraging decades of relationships. The partnership with Telstra to accelerate its data and AI roadmap and the use of the AI Refinery platform for clients like Repsol demonstrate the company's ability to scale AI solutions and reimagine business processes, driving significant value and efficiency. This approach is critical for the adoption of new technologies.

Industry-Specific AI Applications

Examples include a multinational food processing company using GenAI for inventory forecasting and a major auto manufacturer modernizing security operations with a new GenAI security engine. These applications highlight how AI is being deployed to solve specific industry challenges, enhance operational excellence, and drive innovation. Accenture's Industry X segment grew high single digits, and Song grew double digits, reflecting strong demand for specialized solutions.

LearnVantage and Talent Development

LearnVantage is positioned to help clients develop talent and skills for future growth, bridging skill gaps and creating certification pathways, particularly in GenAI. This initiative supports employees in adapting to new technologies and working methods, as demonstrated by programs in Saudi Arabia and with a big box retailer. The company's focus on upskilling its own workforce, with 72,000 data and AI professionals, underpins its ability to deliver these services.

AI-generated summary of the company's earnings call. Not investment advice.