To The Moon

$Accenture PLC(ACN)$ is a global professional services company, and its fiscal Q3 2025 earnings are highly anticipated as a bellwether for the broader consulting and IT services market. The company is set to announce its results on Friday, 20 June 2025, before the market opens.

Earnings Per Share (EPS): The consensus EPS forecast for Q3 2025 is around $3.29, an increase from $3.13 in the same quarter last year. Estimates range from approximately $3.27 to $3.32.

Revenue: Analysts anticipate revenue to be in the range of $16.9 billion to $17.5 billion, with a consensus around $17.27 billion. This would represent year-over-year growth of 3% to 7% in local currency.

Accenture (ACN) Last Neutral Earnings Call Saw Share Price Declined By -3.46%

Accenture (ACN) had a neutral earnings call on 20 March 2025 which saw its share price declined by 3.46% since.

Accenture delivered strong revenue and bookings growth, driven by strategic investments in Gen AI and managed services, along with significant recognition as an industry leader. However, the company faces challenges with federal revenue uncertainty and operating margin pressures, amidst an overall elevated level of economic and geopolitical uncertainty.

Accenture (ACN) Guidance

During Accenture's Second Quarter Fiscal 2025 Earnings Conference Call, the company reported strong performance with $20.9 billion in bookings and revenue of $16.7 billion, reflecting an 8.5% growth in local currency. The operating margin slightly contracted by 20 basis points compared to the previous year, while earnings per share (EPS) grew by 2% over Q2 FY24. Accenture highlighted significant investments, including over $250 million in six strategic acquisitions and approximately 15 million training hours for their workforce.

They also expanded their data and AI workforce to around 72,000, progressing towards a goal of 80,000 by FY26. Despite some challenges in the federal sector due to procurement slowdowns and contract reviews, the company continues to see strong demand for large-scale transformations, particularly in areas like Gen AI, where they achieved $1.4 billion in new bookings and around $600 million in revenue this quarter. Looking forward, Accenture projects 5% to 7% revenue growth for the full fiscal year 2025, maintaining a focus on strategic investments and sustainable growth.

Key Factors and Trends to Watch

Generative AI (GenAI) Bookings and Revenue

Accenture has been aggressively pushing into GenAI, and this will be a major highlight. In Q2 FY25, they reported $1.4 billion in new GenAI bookings, up from $1.2 billion in Q1 FY25, and approximately $600 million in GenAI revenue. Accenture reported quarterly bookings of $20.9 billion, with 32 clients having quarterly bookings greater than $100 million. Revenue grew by 8.5% in local currency, reaching $16.7 billion, which was at the top end of their guided range.

Investors will be looking for continued strong momentum in GenAI bookings and how much of that is translating into actual revenue. The company's ability to convert these new bookings into delivered projects and revenue will be critical.

Accenture's focus on "reinvention" for clients, often involving digital transformation and AI integration, is central to its strategy.

Booking Trends Beyond GenAI

While GenAI is a hot topic, overall new bookings were flat at $20.9 billion in Q2 FY25 (down 3% in USD). This flat trend was a concern for some investors in Q2. Accenture achieved a milestone in Gen AI with $1.4 billion in new bookings and approximately $600 million in revenue this quarter.

The market will be watching if Accenture can show a reacceleration in overall new bookings, indicating a broader pickup in client spending on consulting and managed services.

Any commentary on the pipeline for future quarters will be important. Accenture was recognized as one of the World's Most Ethical Companies for the 18th year in a row and ranked number one in its industry for the 12th consecutive year on Fortune's list of the World's Most Admired Companies.

Revenue Growth and Guidance

Accenture previously narrowed its full-year revenue growth guidance for FY25 to 5% to 7% in local currency. In Q2, revenue grew 8.5% in local currency, reaching $16.7 billion, which was at the top end of their guided range.

For Q3, the projected revenue growth is 3-7% in local currency. The actual reported growth and any updates to the full-year guidance will heavily influence investor sentiment.

The company's ability to maintain or even slightly increase its full-year outlook would be a positive signal, especially given concerns about a potential slowdown in enterprise spending on IT services.

Accenture invested over $250 million in strategic acquisitions and over 15 million training hours for its employees to advance skills in solutions and technology, including Gen AI.

Profitability and Margins

In Q2, Accenture's operating margin was 13.5%, a slight decrease of 20 basis points compared to adjusted operating margin in the prior year.

While the company is investing heavily in GenAI capabilities and talent, maintaining healthy margins amidst these investments is crucial. Any significant pressure on margins could be a negative.

The company expects operating margin for the full year to be between 15.6% and 15.7%. Operating margin contracted by 20 basis points compared to adjusted operating margin last year, largely due to higher subcontractor costs.

Segment Performance

In Q2, all industry groups showed local currency growth: Financial Services (11%), Health & Public Service (10%), Products (9%), Communications, Media & Technology (6%), and Resources (5%).

Monitoring the performance across these segments will indicate where client spending is strongest and weakest. Any significant shifts could reveal underlying market trends.

Geographically, Americas (11% local currency growth) was strong in Q2, while Asia Pacific saw only 1% growth. Accenture noted an elevated level of uncertainty in the global economic and geopolitical environment impacting client activities.

Economic Outlook and Client Spending

Accenture's performance is often seen as a proxy for corporate confidence and spending on digital transformation. Commentary from management on the overall economic environment and client spending patterns will be closely scrutinized.

The slowdown in new procurement actions and contract assessments by the U.S. General Service Administration has created uncertainty in Accenture's federal business, which represented approximately 8% of global revenue.

The cautious market environment highlighted in Q2, despite the earnings beat, suggests that investors are sensitive to signs of slowdown.

Analyst Sentiment and Valuation

Analysts generally maintain a "Strong Buy" or "Buy" rating on ACN, with a mean price target around $356 to $364, suggesting a potential upside from current levels (ACN has been trading around $310-$320 recently).

The stock did decline by 7.3% after its Q2 earnings report despite beating estimates, largely due to flat new bookings and the broader market's cautious stance. This indicates that the market is looking for robust growth and clear signs of acceleration.

Accenture has a strong balance sheet with $8.5 billion in cash at the end of Q2 FY25 and continues to return value to shareholders through dividends and share repurchases.

Accenture (ACN) Price Target

Based on 22 analysts from Tiger Brokers offering 12 month price targets for Accenture in the last 3 months. The average price target is $355.15 with a high forecast of $395.00 and a low forecast of $290.00. The average price target represents a 15.92% change from the last price of $306.38.

Technical Analysis - Exponential Moving Average (EMA)

Accenture have been trading near the 26-EMA and 50-EMA level, with a recent dip below these level, though the RSI momentum is still going strong, ACN need to show that they are able to deliver strong bookings growth with their strategic investments in Gen AI and managed services giving them a better bookings projection.

But the significant margin pressures might cause ACN to see a dip even though EPS estimates could come in with a surprise, so I think we need to watch this stock closely when it starts trading on 20 June 2025.

Summary

Accenture's Q3 2025 earnings will be a critical update for investors. The focus will be on whether the company can maintain its strong growth in GenAI bookings and translate that into substantial revenue.

Reacceleration in overall new bookings, strong revenue growth within or above guidance, and sustained profitability will be key drivers for positive market reaction. Conversely, any further slowdown in bookings or significant margin pressures could lead to a more muted or negative response, regardless of meeting EPS estimates.

Appreciate if you could share your thoughts in the comment section whether you think Accenture can provide earnings surprise with bookings reacceleration paired with strong revenue growth.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.