Accenture (ACN) Bookings Growth In Focus

$Accenture PLC(ACN)$ is expected to release its quarterly fiscal Q2 2025 earnings result on 20 March 2025 before the market open.

ACN is expected to report revenues of $16.58 billion, up 4.9% from the year-ago quarter.

Analysts expect Accenture (ACN) to post quarterly earnings of $2.82 per share, which indicates a year-over-year increase of 2.5%.

Accenture (ACN) Last Positive Earnings Call Saw Share Price Decline By 6.38%

ACN last positive earnings call on 19 Dec 2024 saw its share price decline by 6.38% since.

The earnings call presented a strong start to FY 2025 with notable revenue growth, significant bookings, and EPS improvement. However, challenges such as flat operating margins and competitive pricing pressures were highlighted. Despite these challenges, the company's strategic positioning and workforce growth, alongside positive recognition and brand value increases, suggest a positive outlook.

Accenture (ACN) Guidance On Free Cash Flow And Dividends

During Accenture's Q1 2025 earnings call, key guidance metrics were provided for the upcoming fiscal periods. For Q2, revenue is expected to range between $16.2 billion and $16.8 billion, reflecting a 5% to 9% growth in local currency, with a negative 2.5% impact from foreign exchange. For the full fiscal year 2025, revenue growth is projected at 4% to 7% in local currency, with an inorganic contribution exceeding 3%. Operating margin is anticipated to expand by 10 to 30 basis points, reaching 15.6% to 15.8%, while the effective tax rate is expected to range from 22.5% to 24.5%. Diluted earnings per share are forecasted between $12.43 and $12.79, representing a 4% to 7% increase.

Free cash flow is projected to be between $8.8 billion and $9.5 billion, with at least $8.3 billion returned to shareholders through dividends and share repurchases.

Key Metrics to Evaluate for Accenture (ACN):

Revenue Growth

YoY Growth: Accenture delivered revenue of $17.7 billion in Q1, representing a 9% increase in U.S. dollars and 8% in local currency, exceeding the top end of their guided range by approximately $240 million.

Geographic Performance: North America (~47% of revenue), Europe (~33%), and Growth Markets (~20%). Despite growth in certain areas, the EMEA region faced challenges with a decline in Banking & Capital Markets and revenue declines in France, Singapore, and Australia.

Client Spending: Focus on enterprise IT budgets, cloud migration, and digital transformation demand. The market remains very competitive with lower pricing across the business, consistent with previous quarters.

Profitability

Operating Margin: Accenture typically maintains margins around 15-16%. Look for impacts from wage inflation, utilization rates, or pricing power. The operating margin was flat compared to the adjusted operating margin last year, indicating no improvement in this key metric.

EPS: Earnings per share grew 10% over the adjusted EPS from Q1 FY '24, reaching $3.59.

Bookings

New Bookings: A critical indicator of future revenue. Monitor consulting vs. managed services split. The company achieved $18.7 billion in new bookings, including a milestone $1.2 billion in GenAI bookings and approximately $500 million in revenue.

Large Deals: Multi-year contracts (e.g., cloud, AI, cybersecurity implementations). Accenture was recognized by Fortune as one of the world's best workplaces, moving from #10 to #6, and achieved its highest brand value to date on Interbrand's Best Global Brands List with a value of $21.9 billion, ranking #31.

Workforce Dynamics

Utilization Rate: Higher utilization (employees billable to clients) improves margins.

Headcount Growth: Hiring trends reflect demand expectations. The data and AI workforce increased to approximately 69,000, with a target of 80,000 by the end of FY 2026. Accenture added about 24,000 people in Q1, reflecting business momentum.

Macro and Industry Factors

• Corporate IT Spending: Global economic conditions and enterprise confidence in tech investments.

• Cloud and AI Adoption: Demand for generative AI solutions, cloud migration, and data modernization.

• Currency Impact: ~50% of revenue is non-USD, so FX fluctuations (e.g., EUR, GBP) could affect results.

• Competition: Pressure from rivals like IBM, Deloitte, and Indian IT firms (TCS, Infosys).

Accenture (ACN) Price Target

Based on 19 Wall Street analysts offering 12 month price targets for Accenture in the last 3 months. The average price target is $398.32 with a high forecast of $455.00 and a low forecast of $355.00. The average price target represents a 22.91% change from the last price of $324.07.

If we looked at how ACN prices have been moving, there are some strategic initiatives that could be driving these price movement.

Accenture’s investment in AI and partnerships with OpenAI, Microsoft, etc, how this could drive the client adoption of AI-driven solutions (e.g., customer service automation, data analytics).

The next initiatives would be Accenture’s M&A strategy, how these would help its share price. There have been some focus on sustainability services where focus would be on the growth in net-zero transition projects and ESG reporting tools.

With all the above initiatives, the most important factor we need to watch would be Accenture’s cost optimization, how ACN’s focus on operational efficiency work out amid wage inflation and competitive pricing.

Technical Analysis - Exponential Moving Average (EMA)

We can see that ACN is facing a sharp decline despite the AI demand which could help to power ACN services, but we saw oversold condition from RSI and the attempt to make a daily uptrend towards 12-EMA is not so positive.

We are seeing challenges coming for ACN, as the market continue to experience weakness as there is concerns of economic downside because of tariffs.

I would think ACN need a larger earnings surprise and a very strong free cash flow to show investors that they are indeed a company which has potential.

Summary

When Accenture’s Q2 2025 results are released, focus on bookings growth (a leading indicator), margin performance, and commentary on AI adoption and client spending patterns. The stock’s reaction will hinge on whether Accenture can demonstrate reacceleration in revenue growth amid macroeconomic headwinds.

I would think Accenture current price might be a good discount, if ACN can show that they have a good bookings growth.

Here are some of the updates I will be watching:

1. Guidance Updates: Management’s outlook for FY2025, especially in generative AI and cloud.

2. Margin Resilience: Ability to offset wage inflation with pricing and automation.

3. Sector-Specific Trends: Strength in industries like financial services, healthcare, and retail.

4. Free Cash Flow: Accenture’s capital return program (dividends, buybacks).

Appreciate if you could share your thoughts in the comment section whether you think Accenture would be able to post a larger earnings or surprise with higher bookings 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.