Accenture Plc Q2 FY2025 earnings call

• Accenture had a strong quarter with 8.5% local currency revenue growth to $16.7 billion, at the top end of the guided range. - Bookings were $20.9 billion, with 32 clients having quarterly bookings over $100 million. - Gen AI saw $1.4 billion in new bookings and ~$600 million in revenue. - Federal business faces uncertainty due to GSA review but has long-term opportunities for consolidation and modernization. - Geographic markets showed growth: Americas led by the U.S., EMEA by the UK, and Asia-Pacific by Japan. - Invested significantly in AI workforce (72,000 data and AI employees), acquisitions ($250 million deployed in six acquisitions), and talent development (15 million training hours). - Recognized as one of the World's Most Ethical Companies for the 18th year and number one in its industry on Fortune's list.

Accenture's second quarter fiscal 2025 saw revenues grow 8.5% in local currency to $16.7 billion, at the top end of the guided range. Consulting revenues were $8.3 billion, up 3% in U.S. dollars and 6% in local currency. 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. Geographic segments: Americas saw 11% local currency revenue growth led by the U.S., EMEA had 8% local currency growth led by the UK, and Asia-Pacific had 1% local currency growth led by Japan. Bookings were $20.9 billion, including 32 clients with quarterly bookings greater than $100 million. Gen AI contributed $1.4 billion in new bookings and approximately $600 million in revenue.

• Q3 fiscal 2025 revenue expected to be in the range of $16.9 billion to $17.5 billion, assuming ~negative 0.5% FX impact and 3%-7% local currency growth. - Full fiscal 2025 revenue expected 5%-7% local currency growth over fiscal '24, with FX impact ~negative 0.5%. - Inorganic contribution expected a bit more than 3%, with ~4% in first half and ~2% in second half. - Operating margin expected 15.6%-15.7% for fiscal 2025, a 10-20 bp expansion over adjusted fiscal '24. - Full year diluted EPS expected $12.55-$12.79, 5%-7% growth over adjusted fiscal '24. - Free cash flow expected $8.8 billion-$9.5 billion for full fiscal 2025. - Expect to return at least $8.3 billion through dividends and share repurchases.

• Uncertainty in the global economic and geopolitical environment, which has shifted from earlier quarters. - Federal business uncertainty due to GSA review of contracts with top consulting firms and evolving government priorities.

Q: Jason Kupferberg with Bank of America asked about client activity outside U.S. Federal, asking if there's a pause in client initiatives.

A: Angie Park said there's no change overall; Julie Sweet added some changes are recent and discussions are about accelerating in cost areas but no pauses now.

Q: Jason Kupferberg asked about U.S. Federal revenue growth in the quarter and second half outlook.

A: Angie Park said Q2 Federal revenue details not provided during the year, and full year guidance includes current estimates of federal impacts, with organic growth expected 2%-4% for the year.

Q: Tien-Tsin Huang with JP Morgan asked about margin outlook and change.

A: Angie Park said inorganic capital deployed range $2 billion to $3 billion, gross margins decreased due to higher subcontractor costs and business optimization actions, and operating margin expected 10-20 bp expansion for the year. Julie Sweet added pricing is relatively stable in a competitive market.

Q: Bryan Keane with Deutsche Bank asked about budget conversations and fourth quarter revenue.

A: Julie Sweet said budgets were similar to prior, with elevated uncertainty, and Angie Park added full year guidance assumes discretionary spend doesn't need to improve at the top end but allows for further deterioration.

Q: David Koning with Baird asked about health and public services and pricing.

A: Julie Sweet said no material impact on H&PS, and pricing is relatively stable in a competitive market.

Q: James Faucette with Morgan Stanley asked about geographic and industry impact of uncertainty and AI go-to-market.

A: Julie Sweet said the conversation is global with diverse opportunities, and Gen AI growth is seen with $1.1 billion H1 revenue vs $900 million FY '24 full year. Angie Park added ecosystem is critical in Gen AI adoption.

Q: Bryan Bergin with TD Cowen asked about bookings and workforce mix.

A: Angie Park said bookings were $20.9 billion with book-to-bill 1.3, and workforce mix fluctuates but utilization remains 91%.

Q: Keith Bachman at BMO Capital Markets asked about Gen AI economic relationships and Song growth.

A: Julie Sweet said Gen AI follows prior tech patterns with efficiency driven by technology, and Song's durability is from building digital core and reinvention while leading in Gen AI use.

Q: Jonathan Lee at Guggenheim Partners asked about revenue outlook and pricing timing.

A: Angie Park said revenue outlook range allows for discretionary spend not needing to improve at top but allowing deterioration, and pricing takes time to layer in depending on deal mix.

Q: Darrin Peller at Wolfe Research asked about transformational contracts and tariffs.

A: Julie Sweet said 32 clients with >$100M bookings show focus on large transformational deals, and CEOs are focused on growing regardless of uncertainty; on tariffs, conversations are about reinventing faster despite uncertainty.