Are you a client?
Sign in to view the full news archive.
Accenture’s reward for posting a largely healthy set of numbers for Q325 last Friday (20th June) was to see its share price worth c.7% less by market close. The worst performer on the S&P 500 worst performer that day, the company’s value ended the trading session down by almost 30% on its highest point so far this year.
There was no shortage of positive news in Accenture’s latest set of quarterly results. Turnover for the three months ended 31st May rose by 7% yoy at constant currency to $17.7bn and adjusted operating margin ticked-up by 40 bps to 16.4%. Top line improvements were reported by all of the company’s vertical and horizontal businesses and firm-wide midpoint yoy revenue guidance for FY25 was increased from 6% to 6.5%. Accenture’s Financial Services and America’s units performed particularly well posting yoy sales increases of 13% and 9% yoy respectively. The company’s EMEA region was up 6% against Q324 with turnover of $6.23bn.
Investors, however, appear to have reacted badly to a significant miss by Accenture on new bookings which, having stalled in the prior quarter, were down 7% yoy to $19.7bn in Q3. This was some $1.8bn below analyst expectations. The decline came despite a two-thirds increase in GenAI bookings against Q324, offering further evidence that success in this arena is coming at the expense of sales of more traditional lines of business. The softness in this metric, coupled with CEO, Julie Sweet’s comments regarding a slowdown in discretionary consulting contracts, have added to shareholders’ existing concerns about future growth. These surfaced in March (see here) and relate to the potential impact of US Government cuts to consulting expenditure on the company’s Federal Services unit.
The publication of the company’s Q3 results was accompanied by a separate announcement of an organisational change aimed at boosting Accenture’s bookings. The firm has established a single, integrated business unit called Reinvention Services. Led by Manish Sharma, Accenture’s current CEO of the Americas, the new entity unifies the management of the firm’s horizontal lines of business: Strategy, Consulting, Song, Technology and Operations. The hope is this will facilitate the creation of more leading solutions faster and embed data and AI more easily into its solutions and delivery.
The company will, however, continue to run its business through three geographic markets and go to market by industry. Whether, how materially and how quickly this change to the services development engine will drive increased sales remains to be seen. Accenture is far from alone in facing cautious client spending and intensifying competition in the IT services sector. Continuing uncertainty from tariff policies, governmental budget constraints, and economic volatility make for a challenging trading backdrop; one that is unlikely to improve significantly any time soon.
Posted by: Duncan Aitchison at 08:17
Tags:
results
IT+services