Here's our initial take on Accenture's (ACN -6.59%) fiscal 2025 third-quarter financial report.
Key Metrics
| Metric | Q3 FY24 | Q3 FY25 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $16.5 billion | $17.7 billion | 7.6% | Beat |
| Earnings per share | $3.04 | $3.49 | 15% | Beat |
| Free cash flow | $3.0 billion | $3.5 billion | 17% | Missed |
| New bookings | $21.1 billion | $19.7 billion | -6% | n/a |
Accenture Finds Growth in Challenging Environment
Accenture posted solid growth in a difficult period for consulting companies. Corporate customers are scaling back due to macroeconomic uncertainty, and the U.S. federal contracting environment is bogged down by efforts to cut government spending. Yet Accenture still was able to grow revenue by 7.6% and earnings per share by 15% in the quarter, topping Wall Street estimates.
Financial services was the standout segment based on performance, up 13% year over year, and Accenture saw better strength in the Americas (up 9%) than it did in Europe (up 6%) or Asia (up 4%). Companywide operating margin improved by 80 basis points to 16.8%.
But the results are unlikely to be enough to quell investor fears about the macro economy taking its toll. New bookings for the quarter came in at $19.7 billion, down 6% year over year. Included in that is about $1.5 billion in generative AI new bookings.
Accenture remains a cash generation machine, reporting $3.5 billion in free cash flow in the quarter. The company paid $924 million in dividends and repurchased $1.8 billion of its shares in the quarter, increasing its dividend by 15% compared to fiscal 2024.
Immediate Market Reaction
Investors appear to be focusing on the bookings weakness. Accenture shares were down 5% in premarket trading ahead of the opening bell in New York.
What to Watch
Accenture is now 75% through its fiscal year, and has seen enough to firm up some of its guidance. The company now sees full-year fiscal 2025 revenue up by 6% to 7%, compared to the previous forecast for 5% to 7% growth, and boosted its full-year earnings per share guidance to $12.77 to $12.89, from $12.55 to $12.79. Accenture expects to return "at least" $8.3 billion in capital to shareholders.
There's a lot of uncertainty in the near-term guidance, with the bookings number reflecting the turbulence in the federal contracting market and uncertainty among corporate clients.
But for long-term focused investors, the need for Accenture's assistance in areas such as IT modernization remains as strong as ever, and Accenture appears to be having success establishing itself as a go-to vendor to help clients incorporate artificial intelligence (AI) into their businesses.
Accenture still has a lot of ways to win.
