ACCENTURE: HEALTHY BROAD BASED REVENUE GROWTH, GUIDANCE REVISED UPWARDS ON FOREX REVISIONS

News: Accenture in Q1FY25, reported a broad based revenue growth of US$17.7 billion, up 9% in US$ and 8% YoY in local currency. The operating margin came flat at 16.7% as compared to the adjusted margin of Q1FY24. The new bookings for Q1 stood at US$ 18.7 billion (US$ 9.2 billion in consulting and US$ 9.5 billion in managed services), an increase of 1% on YoY basis, in both U.S. dollars and local currency. The company recorded US$1.2 billion new bookings in GenAI in the quarter. Geography wise in Q1FY25, EMEA led the growth and further grew by 10% while Americas & Asia Pacific, grew by 9% and 6% respectively. Segment wise Products (30% of the mix), Health (21% of mix), Financial Services (18% of mix), CMT (16% of mix) and Resources (13% of the mix) grew by 10%, 12%,4%,7% and 6% respectively. The net employee headcount for the quarter stood at 799,000, up 8% YoY, with bulk hiring made in India. Attrition for the quarter stood at 12%. It expects revenue to be in the range of US$16.2 -US$16.8 billion, reflecting a growth of 5-9% in local currency for Q2FY25. The company raised its revenue growth guidance for FY25 to 4-7% in local currency (vs 3-6% earlier) given the currency impact. 

Views: We note that the improved guidance stems from a lower negative impact expected from forex, which is now projected to be -0.5%, as compared to the previously projected 1.5%. The strong revenue performance coupled with the raised revenue guidance for FY25 consecutively for the second time has positive implications for the Indian IT companies for whom the company's results serve as an indicator of global demand. Notably, the GenAI deal pipeline contributed US$1.2 billion (+US$ 200 mn QoQ) to new bookings in Q1 which is about 6.4% of the company’s overall order bookings, reflecting an increased momentum for GenAI based services. However, the management mentioned that they don’t see an improvement in overall spending by their clients, particularly on smaller deals. Hence, companies keen on Gen AI are prioritizing their spending on the segment, rather than increasing spending overall.

Impact: Positive