Accenture Q1FY25 Results: Indicates some incremental demand recovery

Accenture had a strong quarter with healthy, broad-based revenue growth, signalling positive trends for global IT. Revenues came in at $17.7 billion, up 9% YoY. The operating margin remained flat at 16.7%, while new bookings stood at $18.7 billion, up 1% YoY. 
 
On the order booking front, - Consulting led the growth, contributing $9.2 billion—up 7% YoY—and accounting for 49% of new bookings, largely aligning with management’s commentary that weakness in consulting has likely bottomed out.  Managed services, on the other hand, added $9.5 billion, but that’s down 3.6% YoY, representing 51% of new bookings. 
 
GenAI Momentum: A standout highlight this quarter was their GenAI business. New bookings in this segment reached $1.2 billion, a $200 million sequential increase, now making up 6.4% of total bookings. This shows growing demand for GenAI services, as clients focus their innovation budgets here.  

Guidance and Outlook: For Q2FY25, Accenture expects revenues between $16.2 and $16.8 billion, implying 5-9% local currency growth.  They’ve also revised their FY25 revenue growth guidance upwards to 4-7% in local currency, from 3-6% earlier, driven by a more favourable forex outlook( forex drag is now estimated at -0.5%, down from -1.5%).  The top end of the guidance assumes continuation of the current demand environment, while the lower end factors in some potential softening in demand. The company indicated that demand was unchanged and there hasn’t been a significant improvement, particularly for smaller deals. Discretionary spending remains muted with focus on critical strategic programs that involve modernization and cost take-out..  

Read-through for Indian IT  

GenAI remains a key growth driver. Clients are prioritizing investments in this area; even as overall IT budgets stay flat.  This is likely positive for big Indian IT players. 

Smaller deal spending, however, continues to lag, and the pace of recovery in verticals like BFSI, CMT, and Resources will require close attention.  

Nonetheless, the broad-based growth is a clear positive, indicating incremental demand recovery.  

Overall, Accenture’s results and improved guidance are encouraging for the sector. In this environment, companies with a strong track record in catering to both cost take-outs and discretionary spending are likely to fare better.  The focus now shifts to how quickly demand recovers (clients budget completion in Q1CY25 will be a key monitorable alongwith US growth) and which verticals lead the way.