Accenture announced its Third Quarter Fiscal 2024 Financial Results on 20 June 2024. Traditionally its results set the tone for what to expect from other IT companies.
Here are a few highlights and interpretations from the announcements.
Highlights:
Revenues:Revenues stood at $16.5 billion, an uptick from the previous quarter. Assuming a 2.5% full-year revenue growth, Accenture could potentially close FY24 with slightly better numbers than FY23.
Growth Forecast:For the full fiscal 24, Accenture expects our revenues to be in the range of 1.5% to 2.5% growth in local currency. These projections have been revised quarterly, indicating an unstable demand environment (Q1 FY24 at 2% to 5%, Q2 FY24 at 1% to 3%).
Client Priorities: CEO Julie Sweet has cited clients prioritizing large-scale transformations, which convert to revenue more slowly while limiting discretionary spending, particularly in smaller projects with delays in decision-making and a slower pace of spending.
What’s contributing to the growth
Industries
Accenture reports revenues under five broad industry categories – Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources.
The data, when analyzed from a five year horizon, from FY19, shows the following trends:
- Communications, Media & Technology and Financial Services held steady at 20% each up until Q2 FY23. They have now settled at 17% each. Financial Services alone decreased by 120 basis points in the past two quarters.
- Health & Public Service has seen a steady increase over the five-year span, from 16.5% to 21.3%.
- Products now contribute 30.1%, compared to 27.6% in FY19.
Geographic market
No significant trend here. North America and EMEA, have held steady garnering 83% share.
Consulting and Managed Services
An interesting narrative is being seen here.
Consulting has hovered above the 50% contribution mark. It peaked during COVID-19, reaching an all-time high of 56%, and since then, it has seen a gradual decline, settling at 51%.
The increasing contribution of Managed Services is attributed to its role in larger transformation deals that Accenture is winning rather than to any separate trend.
The share of GenAI in the consulting revenue share is steadily increasing. Bookings alone in three quarters reached $2 billion as compared to $300 million last year and $500 million in realized revenues.
New bookings
- New bookings have doubled from $10.2 billion in Q1 FY19 to $21.06 billion in Q3 FY24.
- Up until Q4 FY23, the share of managed services was below 50%, primarily driven by consulting. However, in FY24, the trend is changing, and it is now at an all-time high of 56%.
- Something to consider: if the share of managed services is increasing, at whose cost? Is Accenture slowly eating into the share of Indian and other competitors?
In Summary,
- Record New Bookings: Accenture has seen record new bookings for the year.
- Revenue Guidance: In the past, revenue guidance was between 8% to 10%. If the US Fed cuts rates earlier than expected, we could potentially see a loosening of budgets and discretionary spending—a booster the industry badly needs.
- GenAI Contribution: GenAI’s share of the revenue mix is slowly increasing. There is also increasing commentary on the flow-through of revenues to the Data practice. Overall, Data and GenAI practices will contribute at an increasing pace. Will it cannibalize existing Consulting revenues, looks like…only time will tell!
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Data source: website of Accenture
Disclaimer: The views expressed in this post are personal and do not reflect those of my organization.
