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12/20 21:27
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance with significant growth in key areas like security services and managed services. The guidance for FY '26 remains optimistic, supported by a strong backlog and pipeline. The company's strategic focus on AI and reinvestment of savings into growth areas is viewed positively. Although there are some uncertainties, such as the impact of DOGE and CapEx increase, the overall sentiment from the call is positive, with a focus on expansion and strategic growth initiatives.
Revenue Growth Accenture grew 7% in fiscal year 2025, adding $5 billion in revenue, with over $80 billion in bookings. This growth was broad-based across markets, industries, and types of work. The majority of the growth was organic. The growth occurred despite a challenging macroeconomic backdrop that did not improve over FY '24.
Advanced AI Revenue Revenue from advanced AI (GenAI, agentic AI, and physical AI) tripled year-over-year to $2.7 billion in FY '25. This growth reflects Accenture's early and decisive investment in GenAI, which is paying off as clients increasingly adopt advanced AI solutions.
Capital Projects Business The capital projects business grew 49% year-over-year in FY '25, reaching $1.2 billion. This growth was largely organic and reflects disciplined inorganic investments made over the years to expand the market and fuel organic growth.
Q4 Revenue Growth Revenues grew 4.5% in local currency in Q4 FY '25. Excluding the 1.5% impact from the federal business, revenues grew 6%. This growth reflects the relevance of Accenture's services and the strength of its diversified portfolio and execution.
Adjusted Operating Margin Adjusted operating margin for Q4 FY '25 was 15.1%, an increase of 10 basis points compared to adjusted Q4 results last year. This reflects Accenture's ability to drive margin expansion while making significant investments in its business and people.
Adjusted EPS Adjusted EPS in Q4 FY '25 was $3.03, representing 9% growth compared to adjusted EPS last year. This growth reflects strong operational performance and margin expansion.
Free Cash Flow Free cash flow for Q4 FY '25 was $3.8 billion, up significantly from the prior year. This reflects strong cash generation from operating activities and disciplined capital expenditure management.
Managed Services Revenue Managed Services revenues were $34.6 billion for FY '25, up 9% in both U.S. dollars and local currency. This growth was driven by 10% growth in technology managed services and 6% growth in operations.
Security Revenue Security services grew 16% year-over-year in FY '25, driven by increased demand for advanced cyber protection and integrated intelligent security solutions.
Advanced AI Revenue: Revenue from advanced AI, including GenAI and agentic AI, tripled to $2.7 billion in FY '25 compared to FY '24.
GenAI Bookings: Bookings nearly doubled to $5.9 billion in FY '25.
Capital Projects Business: This business grew 49% year-on-year to $1.2 billion, largely organically.
Geographic Revenue Growth: Revenue grew 5% in the Americas, 3% in EMEA, and 6% in Asia Pacific in local currency in Q4 FY '25.
Client Expansion: Added 37 clients with quarterly bookings greater than $100 million in Q4, reaching a record of 129 such bookings for the year.
Talent Strategy: Increased AI and data professionals to 77,000 and trained over 550,000 employees in GenAI fundamentals.
Business Optimization Program: Initiated a program with $865 million in charges to optimize talent and divest non-strategic acquisitions.
Reinvention Services: Launched a new unit to integrate all capabilities, simplifying sales and delivery.
AI Leadership: Invested $3 billion in GenAI and advanced AI, positioning as a leader in AI-driven enterprise reinvention.
Ecosystem Partnerships: Strengthened partnerships with top 10 tech companies and expanded to new AI and data partners, driving double-digit revenue growth with many.
Macroeconomic Backdrop: The company faced a challenging macroeconomic environment in FY '25, which did not improve from FY '24. This could impact future growth and financial performance.
Business Optimization Program: The company initiated a 6-month business optimization program, including severance costs and divestiture of two acquisitions not aligned with strategic priorities. This reflects challenges in talent rotation and strategic alignment.
Federal Business Impact: The federal business posed a 1.5% headwind to revenue growth in Q4 FY '25 and is expected to contract mid-teens in FY '26, impacting overall revenue growth.
AI Adoption Challenges: Enterprise adoption of advanced AI is slow, with significant costs and challenges in tech and organizational readiness, including cloud, ERP, and security modernization, as well as data preparedness.
Competitive Pressures: The company operates in a highly competitive market, taking share at more than 5x its investable basket, but this requires continuous investment and innovation to maintain its position.
Regulatory and Security Risks: The company faces risks related to cybersecurity and regulatory compliance, especially as it expands its AI and digital core offerings.
Economic Uncertainties: Economic uncertainties, including currency fluctuations and regional market variations, could impact financial performance and operational stability.
Revenue Growth: For fiscal year 2026, Accenture expects revenue growth in the range of 2% to 5% in local currency, including a 1% to 1.5% impact from its federal business. Excluding the federal business, revenue growth is estimated at 3% to 6%. The company also anticipates a 1.5% inorganic contribution to growth and plans to invest approximately $3 billion in acquisitions.
First Quarter Revenue: Revenues for the first quarter of fiscal 2026 are expected to be in the range of $18.1 billion to $18.75 billion, reflecting an estimated 1% to 5% growth, including a 1.5% impact from the federal business.
Adjusted Operating Margin: For fiscal year 2026, adjusted operating margin is expected to be in the range of 15.7% to 15.9%, representing a 10 to 30 basis point expansion over adjusted fiscal 2025 results.
Adjusted Earnings Per Share (EPS): Adjusted diluted EPS for fiscal year 2026 is projected to be in the range of $13.52 to $13.90, reflecting 5% to 8% growth over adjusted fiscal 2025 results.
Free Cash Flow: Free cash flow for fiscal year 2026 is expected to be in the range of $9.8 billion to $10.5 billion, with a free cash flow to net income ratio of 1.2.
Shareholder Returns: Accenture plans to return at least $9.3 billion to shareholders through dividends and share repurchases in fiscal year 2026, an increase of $1 billion or 12% from fiscal 2025. The quarterly cash dividend has been increased by 10% to $1.63 per share.
Headcount Growth: The company expects to increase its headcount across all three markets, including the U.S. and Europe, reflecting anticipated demand in fiscal year 2026.
Dividend Increase: The Board of Directors declared a quarterly cash dividend of $1.63 per share, a 10% increase over the previous year.
Dividend Payment Date: The dividend is scheduled to be paid on November 14.
Share Repurchase Program: The Board approved an additional $5 billion of share repurchase authority.
Shareholder Returns: Accenture plans to return at least $9.3 billion through dividends and share repurchases in fiscal 2026, an increase of $1 billion or 12% from fiscal 2025.
The earnings call summary indicates stable financial performance with revenue growth and margin expansion. The shareholder return plan is notably positive, with increased dividends and share repurchases. The Q&A section reveals optimism about AI partnerships and pricing improvements, though there is some uncertainty about the timing of AI revenue impact. Overall, the positive guidance and strategic investments suggest a favorable short-term stock price outlook.
The earnings call highlights strong financial performance with significant growth in key areas like security services and managed services. The guidance for FY '26 remains optimistic, supported by a strong backlog and pipeline. The company's strategic focus on AI and reinvestment of savings into growth areas is viewed positively. Although there are some uncertainties, such as the impact of DOGE and CapEx increase, the overall sentiment from the call is positive, with a focus on expansion and strategic growth initiatives.
Accenture's earnings call reveals strong financial performance with an 8% revenue increase and a 12% EPS growth. The company maintains a resilient model despite minor challenges like attrition. The strategic focus on AI and a solid bookings pipeline bolster optimism. Shareholder returns are robust, with increased dividends and share repurchases. Although some risks exist, such as supply chain challenges and investment risks, the overall sentiment is positive due to strong financial metrics, optimistic guidance, and shareholder-friendly actions.
The earnings call summary presents a mixed picture: strong revenue growth and shareholder returns are offset by margin pressure and geopolitical uncertainties. The Q&A highlights management's lack of clarity on revenue risks and growth specifics, adding to uncertainty. While there is optimism around AI and partnerships, the cautious full-year guidance and forex impacts temper expectations. With no market cap data, a neutral rating is appropriate, reflecting balanced positive and negative factors.
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