Accenture Narrows FY25 Guidance to 5-7%, Signals Uncertainty to Continue Accenture's Q2 revenue declined nearly 6 per cent sequentially to USD 16.7 billion. The operating margin for the quarter stood at 13.5 per cent down from 16.7 per cent reported in the previous quarter.
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IT services major Accenture on Thursday narrowed its annual revenue growth forecast for fiscal 2025 to 5-7 per cent, up from the previous projection of 4-7 per cent amid greater near-term revenue visibility but an uncertain business environment.
Accenture's Q2 revenue declined nearly 6 per cent sequentially to USD 16.7 billion. The operating margin for the quarter stood at 13.5 per cent down from 16.7 per cent reported in the previous quarter. Accenture follows the September-August financial year.
Accenture CEO Julie Sweet said in a post-earnings call that the company anticipates potential negative impact to its US federal business under the Donald Trump government as several contracts will be reviewed. Fed business accounted for 8 per cent of the overall revenue and 16 per cent of the US revenue in FY24.
"In recent weeks, we are seeing an elevated level of what was already significant uncertainty in the global economic and geopolitical environment, marking a shift from our first quarter FY25 earnings report in December. At the same time, we believe the fundamentals of our industry remain strong and we are very well positioned with our clients because all strategies continue to lead to reinvention through new ways of working, tech, data, and AI," Sweet said.
Analysts believe Accenture's results reinforces the cautious sentiment in the IT industry. "Accenture's top end of the guidance (unchanged) bakes in no recovery in discretionary spending. The results reinforce the cautious sentiment around discretionary spending in IT services, which remains constrained, particularly for smaller deals…Accenture's commentary suggests that clients remain focused on cost efficiency and large-scale transformation rather than incremental IT services spending," analysts at Motilal Oswal said.
New bookings for the second quarter of fiscal 2025 stood at USD 20.9 billion, a decrease of 3 per cent in US dollars and flat in local currency compared to the second quarter of fiscal 2024. Of this, new bookings in Consulting stood at USD 10.5 billion while that in Managed Services stood at USD 10.4 billion.
Accenture said it reported a "milestone" quarter in Gen AI with USD 1.4 billion in new bookings and approximately USD 600 million in revenue.
In terms of verticals, growth in the second quarter was led by the Financial Services at 11 per cent followed by Health and Public Services growing at 10 per cent. Products, Communications, and Resources verticals grew 9 per cent, 6 per cent, and 5 per cent YoY in constant currency, respectively.
Accenture is considered a bellwether for the Indian IT services industry and it often sets the tone for the upcoming earnings season of Indian IT companies.
A decline in sequential revenue growth and weak commentary from the management pulled down Indian IT stocks like Tata Consultancy Services (TCS), Infosys, and Wipro by nearly 3 per cent in early trade on Friday. However, most of them gradually recovered from the knee-jerk reaction.
As of Friday's market close, shares of TCS were up 0.47 per cent at INR 3,579.40 on the BSE. Shares of both Infosys and Wipro closed down 1.34 per cent at INR 1,592.60 and INR 264.35 respectively on the BSE.
