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Accenture PLC Earnings - Analysis & Highlights for Q2 2025
Overview
PositivesNegativesOutlook
- Revenue grew 8.5% in local currency, with nine of 13 industries growing high-single digits or higher, and the company continues to take market share.
- Revenue growth was driven by the United States.
- The company increased its data and AI workforce to approximately 72,000, continuing progress against its goal of 80,000 by the end of FY 2026.
- The company sees major opportunities over time to help consolidate, modernize, and reinvent the federal government to drive a whole new level of efficiency.
- The company is facing an elevated level of uncertainty, including in its federal business.
- The company is facing ongoing uncertainty as the government's priorities evolve and assessments unfold.
- The company is facing a negative impact on sales and revenue due to the slowing of new procurement actions.
- The company expects to return at least $8.3 billion through dividends and share repurchases.
- The company expects to see a free cash flow to net income ratio of 1.1 to 1.2.
- The company continues to expect to return a substantial portion of its cash to shareholders.
Q&A Highlights from Accenture PLC Earnings Call Q2 2025
- Analyst asked about the extent to which clients are hitting the pause button on new initiatives and the impact on the company's pipeline and revenue.
- The company has not seen any significant change in the pace of converting pipeline to backlog or backlog into revenue. They are in discussions with clients about accelerating programs and contracting, but they are not seeing any pauses in client activity.
- The company has not seen any significant change in the pace of converting pipeline to backlog or backlog into revenue. They are in discussions with clients about accelerating programs and contracting, but they are not seeing any pauses in client activity.
- Analyst asked about the growth rate of US federal revenue in the quarter and the company's assumptions for the second half of the year.
- The company does not provide quarterly revenue figures for US federal. However, they did update their guidance for the year to 5% to 7% growth, which includes their current estimates and assumptions for the potential impacts of federal and the overall environment. The company expects inorganic growth to be over 3% in H2 and 2% for the year, and organic growth to be in the range of 2% to 4% for the year. Consulting is expected to be in the mid-single digit range growth, and Managed Services is expected to be in the high-single digits.
- The company does not provide quarterly revenue figures for US federal. However, they did update their guidance for the year to 5% to 7% growth, which includes their current estimates and assumptions for the potential impacts of federal and the overall environment. The company expects inorganic growth to be over 3% in H2 and 2% for the year, and organic growth to be in the range of 2% to 4% for the year. Consulting is expected to be in the mid-single digit range growth, and Managed Services is expected to be in the high-single digits.
- Analyst asked about the margin outlook and the change in organic versus inorganic growth.
- Angie Park explained that the company's capital deployed has been updated to be a bit lighter at $2 billion to $3 billion, but there has been no change in the margin profile. The company saw a decrease in gross margin in Q2 due to higher sub-contractor costs and the impact of business optimization actions, which reduced severance costs in Q2 of last year. The company expects a 10-20 basis point expansion in operating margin for the year, while continuing to invest in the business and people. The company is focused on pricing and managing supply and demand to make operations more efficient.
- Angie Park explained that the company's capital deployed has been updated to be a bit lighter at $2 billion to $3 billion, but there has been no change in the margin profile. The company saw a decrease in gross margin in Q2 due to higher sub-contractor costs and the impact of business optimization actions, which reduced severance costs in Q2 of last year. The company expects a 10-20 basis point expansion in operating margin for the year, while continuing to invest in the business and people. The company is focused on pricing and managing supply and demand to make operations more efficient.
- Analyst asked about the risk factors in duration and the impact on work replenishment.
- Julie Spellman Sweet explained that the company's guidance range reflects its best view of the impact of the slowing of new procurement actions and the assessments of the work that the company is doing. The company does not provide a breakdown of the different factors affecting the range, but it is looking at both the slowing of new procurement actions and the assessments of the work that it is doing. The company's guidance range reflects its best view of the impact of these factors.
- Julie Spellman Sweet explained that the company's guidance range reflects its best view of the impact of the slowing of new procurement actions and the assessments of the work that the company is doing. The company does not provide a breakdown of the different factors affecting the range, but it is looking at both the slowing of new procurement actions and the assessments of the work that it is doing. The company's guidance range reflects its best view of the impact of these factors.
- Analyst asked about the company's plan to incorporate a slowdown in organic growth in Q4.
- Angie Park explained that the company has seen an elevated level of uncertainty, which has resulted in a lower inorganic contribution of 2% for the second half of the year, leading to an organic growth of 2% to 4% for the full year.
- Angie Park explained that the company has seen an elevated level of uncertainty, which has resulted in a lower inorganic contribution of 2% for the second half of the year, leading to an organic growth of 2% to 4% for the full year.
- Analyst asked about the performance of Health & Public Services (H&PS) in Q2, specifically regarding the 5% sequential decline.
- Angie Park responded that there was no material impact on H&PS and that the decline was due to the ebb and flow of the quarter, with no significant changes or issues.
- Angie Park responded that there was no material impact on H&PS and that the decline was due to the ebb and flow of the quarter, with no significant changes or issues.
- Analyst asked about the development of Accenture's software partners and the adjustments in go-to-market strategies.
- Julie Spellman Sweet explained that Accenture's ecosystem is critical to its success, with decades of relationships and partnerships enabling them to work closely with clients to reinvent and drive results. The company's leadership in its ecosystem has been a major differentiating factor in its growth, particularly in large deals. Accenture also noted that its GenAI revenue has grown significantly, with $1.1 billion in revenue in H1 and $900 million for the entire year in FY 2024.
- Julie Spellman Sweet explained that Accenture's ecosystem is critical to its success, with decades of relationships and partnerships enabling them to work closely with clients to reinvent and drive results. The company's leadership in its ecosystem has been a major differentiating factor in its growth, particularly in large deals. Accenture also noted that its GenAI revenue has grown significantly, with $1.1 billion in revenue in H1 and $900 million for the entire year in FY 2024.
- Analyst asked about Accenture's workforce management, specifically the mix of sub-contractors versus employees.
- Angie Park explained that Accenture's workforce mix can fluctuate quarter-to-quarter based on the work they are doing for clients. In Q2, they added around 2,000 people to their workforce. The company focuses on managing its supply and demand, including through the use of technology and reskilling. Their utilization rate remains at 91%, which is within their desired range.
- Angie Park explained that Accenture's workforce mix can fluctuate quarter-to-quarter based on the work they are doing for clients. In Q2, they added around 2,000 people to their workforce. The company focuses on managing its supply and demand, including through the use of technology and reskilling. Their utilization rate remains at 91%, which is within their desired range.
- Analyst asked about changes in the economic relationship with customers due to the use of GenAI.
- The company has not seen any significant changes in the economic relationship with customers due to the use of GenAI. They are still seeing the same patterns of automation and efficiency gains from technology that they have seen in the past. They are also focusing on leading in both helping their clients use GenAI and leading in their own use of GenAI.
- The company has not seen any significant changes in the economic relationship with customers due to the use of GenAI. They are still seeing the same patterns of automation and efficiency gains from technology that they have seen in the past. They are also focusing on leading in both helping their clients use GenAI and leading in their own use of GenAI.
- Analyst asked about the most transformational contracts and how the company is executing on its strategy to be relevant across the enterprise.
- The company is executing on its strategy to be relevant across the enterprise by continuing to execute on large transformational deals and focusing on where the demand is. They are also seeing a shift in the way CEOs are thinking about their businesses, with a focus on how to succeed regardless of the level of uncertainty. The company's resilient business model, which is anchored on deep client relationships, diversification, and leadership in technology, allows them to navigate different cycles and markets.
- The company is executing on its strategy to be relevant across the enterprise by continuing to execute on large transformational deals and focusing on where the demand is. They are also seeing a shift in the way CEOs are thinking about their businesses, with a focus on how to succeed regardless of the level of uncertainty. The company's resilient business model, which is anchored on deep client relationships, diversification, and leadership in technology, allows them to navigate different cycles and markets.
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