Accenture Q3 2025 Earnings Call Transcript

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Provided by Quartr
June 20, 2025

Key Takeaways

  • Accenture delivered Q3 revenue of $17.7 billion (7% LCU growth), bookings of $19.7 billion (1.1 book-to-bill) and expanded operating margin by 40 bps to 16.8%, driving 12% adjusted EPS growth to $3.49 and $3.5 billion in free cash flow.
  • The company reinforced its GenAI leadership with $1.5 billion in Q3 GenAI bookings, over $700 million in GenAI revenue, and YTD GenAI bookings of $4.1 billion.
  • Accenture raised its FY25 outlook, now expecting 6%–7% LCU revenue growth, 15.6% operating margin, $12.77–$12.89 EPS range, $9.0–$9.7 billion free cash flow, and plans to return at least $8.3 billion to shareholders.
  • The firm continues heavy investments—38 million training hours YTD (+18%), a 75,000-strong data & AI workforce, and $297 million spent on four strategic acquisitions in learning and Industry X capabilities.
  • Accenture anticipates a 2% headwind in Q4 from federal business pressures and slower public-sector procurements, partially offsetting its growth trajectory.
AI Generated. May Contain Errors.
Earnings Conference Call
Accenture Q3 2025
00:00 / 00:00

Transcript Sections

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Operator

Good day, and welcome to Accenture's Third Quarter Fiscal twenty twenty five Earnings Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Alexia Quadrani, Executive Director and Head of Investor Relations. Please go ahead.

Alexia Quadrani
Alexia Quadrani
ED - IR at Accenture

Thank you, operator, and thanks, everyone, for joining us today on our third quarter fiscal twenty twenty five earnings announcement. As the operator just mentioned, I'm Alexia Quadrani, Executive Director, Head of Investor Relations. On today's call, we will hear from Julie Sweet, our Chair and Chief Executive Officer and Angie Park, our Chief Financial Officer. We hope you've had an opportunity to review the news release we've issued a short time ago. Let me quickly outline the agenda for today's call.

Alexia Quadrani
Alexia Quadrani
ED - IR at Accenture

Julie will begin with an overview of our results. Angie will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the third quarter. Julie will then provide a brief update on our market positioning before Angie provides our business outlook for the fourth quarter and our full fiscal year 2025. We will then take your questions before Julie provides a wrap up at the end of the call. Some of the matters we'll discuss on this call, including our business outlook, are forward looking and as such are subject to known and unknown risks and uncertainties, including, but not limited to, those factors set forth in today's news release and discussed in our annual report on Form 10 ks and quarterly reports on Form 10 Q and other SEC filings.

Alexia Quadrani
Alexia Quadrani
ED - IR at Accenture

These risks and uncertainties could cause actual results to differ materially from those expressed on this call. During our call today, we will reference certain non GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non GAAP financial measures where appropriate to GAAP in our news release or in the Investor Relations section of our website at accenture.com. As always, Accenture assumes no obligation to update the information presented on this conference call. Now let me turn the call over to Julie.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Thank you, Alexia, and to everyone joining this morning. And thank you to our more than 790,000 people around the world for your extraordinary work and commitment to our clients, which resulted in another strong quarter of reinvention across industries, companies and countries. Starting with our quarter, we are very pleased with our results as we continue strategy to be our clients' reinvention partner of choice and lead in GenAI. Our clients continue to prioritize large scale reinventions as reflected in our bookings of $19,700,000,000 including 30 clients with quarterly bookings greater than $100,000,000 We grew 7% in local currency with revenue of $17,700,000,000 above our guided range and we continue to take market share on a rolling four quarter basis against our basket of our closest global publicly traded competitors, which is how we calculate market share. We are a leader in Gen AI with another milestone quarter of $1,500,000,000 in bookings and over $700,000,000 in revenues, bringing our Q3 year to date Gen AI bookings to a total of $4,100,000,000 and revenue to $1,800,000,000 Operating margin expanded 40 basis points compared to adjusted operating margin last year, and we delivered EPS growth of 12% over Q3 FY twenty twenty four adjusted EPS.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

We continue to invest significantly in our business to drive additional growth in highly strategic areas. We invested in our people with 38,000,000 training hours year to date, up 18% over the same period last year. We increased our data and AI workforce to approximately 75,000, continuing progress against our goal of 80,000 by the end of FY twenty twenty six. We invested over $297,000,000 across four strategic acquisitions and investments. We are expanding our LearnVantage capability through this quarter's acquisitions of TalentSprint in India and Ascendiant in The United States, enhancing our ability to deliver industry relevant certifications and tailored upskilling and reskilling programs.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

In Japan, we acquired YouMemi, which strengthens Song's ability to craft, launch and scale digital products that are both intelligent and impactful. We are also investing in our industry X capabilities with the acquisition of Sobin in Scotland, expanding our infrastructure and capital projects expertise globally and across Europe. We are proud to have earned the number six spot on the Great Place to Work list of the world's best workplaces and to have been recognized as a great place to work in 12 individual countries representing nearly 80% of our people. And in recognition of our strong brands, we are proud to have earned the number 20 position on Cancer Brands' prestigious list of the top 100 most valuable global brands. Our brand value has increased by 27% to $103,800,000,000 up from $81,900,000,000 last year.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

A key component of our long term strategy is investing and maintaining thriving communities and creating pipelines of talent for the skills we need, which are important for businesses to thrive. In The UK, one of our largest markets, we are supporting a government initiative to create a coalition with 10 other companies focused on upskilling 7,500,000 people, one fifth of The UK workforce in AI skills, breaking down barriers to opportunity and unlocking economic growth. I'm also thrilled to congratulate our 97,000 people who were promoted this fiscal year, including more than 800 who were promoted to Managing Director. In summary, we had a strong quarter. Over to you, Angie.

Angie Park
Angie Park
CFO at Accenture

Thank you, Julie, and thanks to all of you for taking the time to join us on today's call. We are very pleased with our third quarter results with revenue above our guided range as well as very strong margin expansion, EPS growth and free cash flow. These results reflect the diversity and resilience of our business and demonstrate our ability to deliver significant value for our shareholders. Based upon the strength of our results, we once again raised our full year revenue outlook and we are on track to deliver or exceed all aspects of our guidance provided in September. Let me summarize a few highlights from the quarter.

Angie Park
Angie Park
CFO at Accenture

Revenues grew 7% in local currency and continued to be broad based across geographic markets, industry groups and both types of work. Seven of our 13 industries grew high single digit or higher in the quarter and our federal business had an immaterial impact to our overall growth in Q3. And we continue to take market share reflecting the strength of our diversified portfolio and execution. Operating margin of 16.8% for the quarter, an increase of 40 basis points compared to adjusted Q3 results last year and includes significant investments in our people and our business. We delivered EPS in the quarter of $3.49 reflecting a 12% growth over adjusted EPS last year.

Angie Park
Angie Park
CFO at Accenture

Finally, we delivered free cash flow of $3,500,000,000 and returned $2,700,000,000 to shareholders through repurchases and dividends. Nine months into the fiscal year, we have invested $789,000,000 primarily attributed to 15 acquisitions. With those high level comments, let me turn to some of the details starting with new bookings. New bookings were $19,700,000,000 for the quarter, a 6% decrease in U. S.

Angie Park
Angie Park
CFO at Accenture

Dollars and 7% in local currency with an overall book to bill of 1.1. Consulting bookings were $9,100,000,000 with a book to bill of one point zero. Managed services bookings were $10,600,000,000 with a book to bill of 1.2. Turning now to revenues. Revenues for the quarter were $17,700,000,000 an 8% increase in U.

Angie Park
Angie Park
CFO at Accenture

S. Dollars and 7% in local currency, above our FX adjusted guided range as the foreign exchange impact for the quarter was approximately positive 0.5% compared with a negative 0.5% estimate provided last quarter. Consulting revenues for the quarter were $9,000,000,000 up 7% in U. S. Dollars and 6% in local currency.

Angie Park
Angie Park
CFO at Accenture

Managed services revenues were 8,700,000,000 up 9% in both U. S. Dollars and in local currency driven by double digit growth in technology managed services, which includes application managed services and infrastructure managed services and mid single digit growth in operations. Turning to our geographic markets. In The Americas, revenue grew nine percent in local currency.

Angie Park
Angie Park
CFO at Accenture

Growth was led by banking and capital markets, industrial and health. Revenue growth was driven by The United States. In EMEA, we delivered 6% growth in local currency led by growth in life sciences, banking and capital markets and insurance. Revenue growth was driven by The United Kingdom, Germany and Italy. In Asia Pacific, revenue grew 4% in local currency driven by growth in public service, banking capital markets and insurance partially offset by a decline in chemicals and natural resources.

Angie Park
Angie Park
CFO at Accenture

Revenue growth was led by Japan and Australia, partially offset by a decline in Singapore. Moving down the income statement. Gross margin for the quarter was 32.9% compared to 33.4% for the third quarter last year. Sales and marketing expense for the quarter was 9.9% compared to 10.6% for the third quarter last year. General and administrative expense was 6.1% compared to 6.3% for the same quarter last year.

Angie Park
Angie Park
CFO at Accenture

Before I continue, I want to note that in Q3 of FY twenty twenty four, we recorded $77,000,000 in costs associated with our business optimization actions, which decreased operating margin by 40 basis points and EPS by $08 The following comparisons exclude these impacts and reflect adjusted results. Operating income was $3,000,000,000 in the third quarter, reflecting a 16.8% operating margin, a 40 basis point increase from adjusted operating margin in Q3 of last year. Our effective tax rate for the quarter was 24% compared with an adjusted effective tax rate of 25.5% for the third quarter last year. Diluted earnings per share were $3.49 compared with adjusted diluted EPS of $3.13 in the third quarter last year reflecting 12% growth. Day services outstanding were forty seven days compared to forty eight days last quarter and forty three days in the third quarter of last year.

Angie Park
Angie Park
CFO at Accenture

Free cash flow for the quarter was $3,500,000,000 resulting from cash generated by operating activities of $3,700,000,000 net of property and equipment additions of $169,000,000 Our cash balance at May 31 was $9,600,000,000 compared with $5,000,000,000 at August 31. With regard to our ongoing objectives to return cash to shareholders, in the third quarter we've repurchased or redeemed 6,000,000 shares for $1,800,000,000 at an average price of $302.35 per share. As of May 31, we had approximately $3,300,000,000 of share repurchase authority remaining. Also in May, we paid a quarterly cash dividend of $1.48 per share for a total of $924,000,000 This represented a 15% increase over last year. And our Board of Directors declared a quarterly cash dividend of $1.48 per share to be paid on August 15, a 15% increase over last year.

Angie Park
Angie Park
CFO at Accenture

In closing, we feel very good about our results in Q3 and are now working hard to deliver Q4 and continuing to operate our business with rigor and discipline. And now, let me turn it back to Julie.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Thank you, Angie. Let me start with the environment in which our clients are operating today. Steating the obvious, as we shared last quarter, we continue to see a significantly elevated level uncertainty in the global economic and geopolitical environment as compared to calendar year 2024. In every boardroom and every industry, our clients are not facing a single challenge. They are facing everything at once, economic volatility, geopolitical complexity, major shifts in customer behavior.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

In these times, our clients need us more than ever. They look to us to help them build resilience and deliver results. To not only navigate the environment, they want to thrive and be the first to reshape their industries. To do so, all roads lead to reinvention. GenAI has been a catalyst for reinvention because the power of GenAI has created the opportunity to meet challenges in new ways and is creating new opportunities to achieve even better results than any single technology in the Internet era.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

And yet, GenAI alone is just a tool. The work needed to use GenAI to create value at scale is substantial. We are working with our clients using all of our reinvention expertise, our deep understanding of how to build a cognitive brain for the enterprise and our deep understanding of data, every function in the enterprise, industries and change as well as our own experience reinventing Accenture. The breadth and depth of our capabilities across industries and solutions that use all of our services is clear in the examples I will highlight today. We are working with Air France KLM, a global leader in aviation on a digital transformation that will redefine how they operate and serve millions of travelers worldwide by using the power of cloud, data and AI.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

As part of a multiyear partnership, we will help them move away from proprietary data centers and migrate their legacy applications to the cloud. This work is expected to unlock new efficiencies across passenger flights, cargo services and aircraft maintenance to improve the traveler experience. It will drive faster decision making using real time insights and a scalable platform to quickly deploy additional resources when there is a spike in demand. And we have already delivered value by successfully deploying over 400 apps using a proven governance model that accounts for the company's need for safety, reliability and resilience to disruptions. With a more agile digital foundation in place, Air France KLM will be setting the stage for growth through continuous reinvention and the creation of new value.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

We are advancing our partnership with Bincunteria, one of the world's largest shipbuilders, to accelerate digital transformation across the maritime industry, helping the sector navigate growing complexity, rising operational demands and the urgent need for sustainability. Combining our deep expertise in digital platforms, AI and connected and intelligent operations, we're building Navis Sapiens, an AI powered ecosystem designed to make ships smarter and more integrated. This includes building application services that streamline how ships operate and are maintained, creating a secure AI powered platform and establishing a marketplace where maritime companies can share digital solutions. For example, a next generation cruise or naval ship will use a digital twin and IoT sensor network to simulate and monitor vessel core systems. This coupled with real time data exchange between ports, ships and shipyards, will support AI driven diagnostics like predictive maintenance and energy management, such as fuel efficiency, to create a more resilient and sustainable infrastructure.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

The first AI equipped ship is expected to launch by the end of twenty twenty five, demonstrating how we're helping Think Ontario set a new benchmark for innovation in capital intensive industries. We partnered with Nationwide Building Society, one of The U. Institutions and the world's largest building society, transform their cybersecurity operations and stay ahead of evolving threats. We built a cloud based GenAI powered security information and event management capability and migrated hundreds of terabytes of security logs and detection use cases to help them achieve a streamlined security infrastructure. This is expected to fast track the deployment process by 40% compared to traditional methods, while maintaining full operational continuity.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Now Nationwide has a future ready security operations center that can detect cyber threats faster than before, reduce manual effort required from its cybersecurity team and enhance business resilience. Laying the foundation for future adoption of automation and GenAI in its security ecosystem. Our clients continue to take advantage of GenAI as one of the ways they can accelerate their reinvention, And we see many clients successfully scaling GenAI to create value today. We are deepening our partnership with Pfizer, one of the world's top pharmaceutical and biotech companies to lead the next wave of reinvention using GenAI and AgenTeq technologies to transform operations, empower talent and accelerate digital maturity. Through our GenWizard platform, we are reimagining how technology managed services are delivered by embedding AI into the process to reduce redundancy, lower costs and increase efficiencies.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

We are also integrating components of AI Refinery into the GenWizard platform to help the company implement AgenTeq AI and ZeroOps automation. Now intelligent agents will proactively monitor and resolve issues, freeing up support teams to focus on higher value work. For example, when an employee encounters a system issue, an AgenTeq AI agent can instantly identify similar past cases, resolve the ticket automatically and take steps to prevent such issues in the future, reducing manual effort and improving speed to resolution. And through our LearnVantage services, we are training the company's digital employees on leveraging AgenTik AI to drive operational facilities, efficiencies, foster joint ownership and enable seamless adoption. This transformation is helping Pfizer set a new standard for how digital and AI technologies and capabilities accelerate innovation and drive efficiencies to bring medicines to patients faster.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

We are continuing our work with TrueNooks, an integrated mind to pigment global market leader to reimagine operations using AI driven solutions that will enhance data trust, productivity and operational agility. Together, we will build a cloud based standardized data foundation as the backbone for the company's digital core. Using our AI Refinery platform, we will launch a new set of services based on high value Priority Gen AI and ejected use cases focusing on productivity, site efficiency and workforce enablement. For example, a sales and marketing advisor to streamline customer segmentation, a knowledge assistant to unify institutional knowledge across global sites and an asset management tool to proactively identify and resolve operational issues. The platform will also support process control and decision making using data to enable predictive insights, faster response times and improved operational stability.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Our collaboration means Tronex is positioned to achieve long term differentiation in the pigment manufacturing industry. We are continuing our work with Vale, a Brazilian mining and logistics company to transform its environmental licensing program, accelerating permit applications and advancing its sustainability goals. We've now expanded smart licensing, an end to end management platform to support greater scale and functionality. Using generative AI, the platform scans application materials and environmental studies to help ensure compliance with regulatory and environmental requirements. Building on this foundation, we've continually introduced new features and enhance the platform's intelligence and business value.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

These include tailoring checklists for applicants based on project type and location, automating document validation steps and deploying AI powered chatbots to assist users throughout the licensing process. Together, these improvements have significantly reduced internal review time and improved submission quality while minimizing rework with demand areas. With our broad capabilities across everything needed to serve the customer from creative to industry expertise to technology and of course the latest in AI, we are helping clients shape new growth opportunities. We are collaborating with Nestle, a global leader in food and beverage with well known brands like Purina, Nescafe, Dolce Gusto and Nespresso to accelerate its digital transformation journey using AI powered digital twins to meet the growing demand for personalized high quality content. In partnership with Accenture Song, we've developed platform that creates three d virtual replicas of physical products to streamline content creation and localization.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Nestle's marketing experts can now generate campaign ready assets without repeated reshoots, digitally adjusting packaging and integrating products into formats tailored to each channel and market. With thousands of digital assets already created, Nestle is reducing the time and cost of scaling digital twins by over 70%, accelerating production, enhancing quality and keeping their iconic brands top of mind. Accenture Song also is helping a Fortune 100 high-tech company transform its sale and marketing functions to meet the demands of the fast evolving business landscape. With increasing pressure to improve execution, the company is focused on simplifying structure, reducing cost and unifying efforts across regions under a leaner, more agile approach powered by an integrated customer data layer. Together, we're shaping a future ready model that brings greater integration across sales and marketing, accelerating speed to market, increasing efficiency through automation and shared services, driving value through GenAI and AgenTeq architecture.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

By focusing on data, AI, customer experience and simplified ways of working, Song is helping this leading company strengthen execution, enhance creative impact and deliver lasting business results. I hope these examples have brought to life the amazing work on which we have the privilege of partnering with our clients and the technology ecosystem. We are able to do this quarter in and quarter out, because we invest in having great people and in building extraordinary capabilities across our services, developing deep industry and functional expertise, creating world class AI enabled assets and platforms like GenWizard, the AI Refinery and SynOps, and by investing in our unmatched technology ecosystem partnerships. And then we bring all of these capabilities together as solutions for our clients that deliver measurable value. Which brings me to the exciting news we announced today for how we are changing our growth model, so that we can be the most AI enabled, client focused, great place to work in the industry and capture the massive opportunity we see for our clients, technology partners and Accenture.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Starting September 1, we are bringing all of our services, strategy consulting, song technology and operations together into a single integrated business unit called Reinvention Services. Once we fully implement our new model, we will be able to bring more leading solutions faster and embed data and AI more easily into our solutions and delivery. We will also be able to help our people learn and apply AI more easily as this technology continues to evolve quickly. We will continue to manage our business through our geographic markets, The Americas, EMEA and APAC and go to market by industry. I'm excited about these changes and how they will fuel our growth. Back to you, Angie.

Angie Park
Angie Park
CFO at Accenture

Thanks, Julie. Now let me turn to our business outlook. For the fourth quarter of fiscal twenty twenty five, we expect revenues to be in the range of 17,000,000,000 to $17,600,000,000 This assumes the impact of FX will be approximately positive 2.5% compared to the fourth quarter of fiscal twenty twenty four and reflects an estimated 1% to 5% growth in local currency. I'd also like to provide some additional context on our guidance for Q4.

Angie Park
Angie Park
CFO at Accenture

As it relates to our federal business, we saw an immaterial impact to our overall growth in Q3 and our best estimates right now include about a 2% headwind overall in Q4. Moving to full fiscal twenty twenty five. Based upon how the rates have been trending over the last few weeks, we now assume the impact of FX on our results in U. S. Dollars will be positive 0.2% compared to fiscal twenty twenty four.

Angie Park
Angie Park
CFO at Accenture

For the full fiscal 2025, we now expect our revenue to be in the range of 6% to 7% growth in local currency over fiscal twenty twenty four. We expect our inorganic contribution for the full year to be about 3% and we now expect to invest about 1,000,000,000 to $1,500,000,000 in acquisitions this fiscal year. For operating margin, we now expect fiscal year twenty twenty five to be 15.6%, a 10 basis point expansion over adjusted fiscal twenty twenty four results. We now expect our annual effective tax rate to be in the range of 23% to 24%. This compares to an adjusted effective tax rate of 23.6% in fiscal twenty twenty four.

Angie Park
Angie Park
CFO at Accenture

We now expect our full year diluted earnings per share for fiscal twenty twenty five to be in the range of $12.77 to $12.89 or 7% to 8% growth over adjusted fiscal twenty twenty four results. For the full fiscal twenty twenty five, we now expect operating cash flow to be in the range of 9,600,000,000.0 to $10,300,000,000 property and equipment additions to be approximately $600,000,000 and free cash flow to be in the range of $9,000,000,000 to $9,700,000,000 Our free cash flow guidance continues to reflect a free cash flow to net income ratio of 1.1x to 1.2x. Finally, we continue to expect to return at least $8,300,000,000 through dividends and share repurchases as we remain committed to returning a substantial portion of cash for shareholders. With that, let's open it up so that we can take your questions. Alexia?

Alexia Quadrani
Alexia Quadrani
ED - IR at Accenture

Thanks, Angie. I would ask that you each speak to one question and a follow-up to allow as many participants as possible to ask a question. Operator, would you provide instructions for those on the call?

Operator

Absolutely. Today's first question comes from Tien Tsin Huang with JPMorgan. Please go ahead.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Thanks so much. Good morning. I want to ask about the leadership changes in talent retention, if that's okay, voluntary and involuntary is what I'm thinking about. Given some of the headcount numbers this quarter, getting a lot of some questions on that and some departures from the leaders with today's reorg. I'm just curious, really observing any change in talent retention or shift in talent delivery overall?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

No. So maybe to separate the two, attrition ticked up a little bit this quarter, but as you know that goes up and down. It's well within kind of what we normally see. Tien Tsin, over time we have leaders who leave Accenture and pursue other opportunities. Our leaders are in demand as you might imagine.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

And we have a deep bench of leaders and of course and we can talk a little bit more about that. We have a great track record of putting in place new growth models and driving growth.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Yes. History is definitely there. Okay. My follow-up question, just I know you've called out now a couple of quarters of heightened uncertainty, but you're still generating revenue above your guidance. Public sector, I think I heard immaterial couple of points on overall growth in the fourth quarter and products were generally fine.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

I know that was a worry. I'm just curious if it's this heightened uncertainty is translating at all in any way and how you're guiding or how you're seeing clients interact with you? How did bookings come in versus plan? And any other considerations as you exit the year given the 1% to 5% growth guide? Thank you.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Tianjin, it's a great question and it really speaks to the resilience of our model. When we think about resilience, we think about what are the building blocks that we have built over decades that we can bring together and quickly shift to meet clients' needs. If you think about fiscal year 'twenty four, when we saw this continuation of lower discretionary spending, we said what clients want is reinvention. Right? They want the big transactions and we pivoted over the sort of three quarters or so in FY24 to say, if that's what they want, let's bring all of our services, let's focus on that, right, because the discretionary spending wasn't there and we didn't have an expectation.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

We told you all when we came into this year that even at the top end of our guided range, right, we were making allowances for lower discretionary spending. That our ability to do that is because we have for decades trusted relationships. We have an incredible list of clients. We have large relationships with those clients and uniquely in the market, have strategy, consulting, we have technology, operations, song, all of this is what's bringing together and you see that in the examples we give quarter after quarter. And so what we do is in tough markets is we focus on what our clients need and we see that trend.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

You will remember back in April of twenty twenty two, when we had our first Investor and Analyst Day, this is what we predicted. We introduced our strategy to be the reinvention partner of choice and since that quarter, we have had nearly $400,000,000 or more bookings in a quarter since that quarter, which is our proxy for reinvention. What you are seeing is the benefits of the agility that we have built into our model from diversification, from client relations built over decades and very importantly, our ability to change fast.

Tien-tsin Huang
Tien-tsin Huang
Senior Analyst at JP Morgan

Well done. Thank you.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Thanks.

Operator

And our next question today comes from David Kearney with Baird. Please go ahead.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Yes. Hey, guys. Good job. And I guess my first question, Gen AI bookings remained very strong, but sequentially grew a little slower than in some previous quarters. And just wondering kind of the backdrop of Gen AI demand relative to other types of projects in the current environment.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

The Gen AI demand continues to be very, very strong. And now it's getting big enough that it's going to fluctuate a little bit, right? But you'll see it even as we went through a lot of examples today, Gen AI is just being more and more embedded into everything we do.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Okay. Thank you. And then I guess just a numbers question. Secondly, pace of acquisitions a lot slower this year than last year obviously. Still the 3% or a little over 3% guide for this year's contribution, is that intact?

David Koning
Senior Research Analyst at Robert W. Baird & Co

And then maybe what could we expect maybe into next year based on a little slower pace of acquisitions this year?

Angie Park
Angie Park
CFO at Accenture

Hi, David and thanks for the question. I'll start here. I do want just to ground us on the fact that our acquisition strategy remains exactly the same. We've been doing acquisitions, to scale and expand our capabilities now for over a decade. And what's really important is the discipline that we use, right?

Angie Park
Angie Park
CFO at Accenture

So as you think about this year, we've not seen, the level of acquisitions given the tough market and you've seen us we can flex up, we can flex down based upon the opportunities. But what you do what you should know is that, what remains the same is our acquisition strategy is core and it's a continuing part of our growth strategy. So we'll continue to target about 2% year in and year out in inorganic contribution, of course that can ebb and flow. And you saw that last year with the volume of acquisitions that we did last year and this year it's a little wider upon what we see. And for this year, we continue to expect about 3% for the year.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Yes. And let me just add a little bit. Obviously, we're not going to guide for next year, but if our target is roughly 2%, it goes up and down. The thing that's very important is that we don't buy acquisitions if they don't have good economics, right? So it's we have an economic focus and then they help us either scale, bring these new capabilities or build our industry and functional capabilities.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

And the industry has been tough this year and we just haven't seen the kinds of economics that we think makes sense to bring in. And we see that as being more of a market condition right now, not something that changes our view of acquisitions over the long term. And we'll give you a view of what we see at the beginning of the year, next year, but things change over time and so we saw more last year, but kind of as things have developed, we just haven't seen the right targets this year, that makes sense.

David Koning
Senior Research Analyst at Robert W. Baird & Co

Yes. That's great. Thanks guys. Good job.

Operator

Thanks. Thank you. And our next question today comes from James Faucette with Morgan Stanley. Please go ahead.

James Faucette
James Faucette
Managing Director at Morgan Stanley

Hi, good morning. Thanks for all the details. I wanted to just quickly follow-up on that question around acquisitions and contribution. I understand you're not seeing kind of the it sounds like you're not seeing the financial profile. But how are you feeling about any change that you may need to make or want to make in terms of types of companies or skill sets, etcetera, that you're looking at?

James Faucette
James Faucette
Managing Director at Morgan Stanley

Is that changing at all or does that remain relatively consistent with how you've evaluated acquisitions from a capability standpoint in the past?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Yes. I mean, the categories remain the same. So we start with our business strategy and then we are always looking at, okay, what's hot and what makes sense to build versus buy. Remember, our primary growth strategy is organic growth and I might just add, organic growth is back, something we committed to you at the end of last year as we come into this year. That's our primary growth.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

But what we're always making an estimate is when do you build, when do you buy and it really ties to our strategy. You saw us make a capital projects acquisition again this quarter with Sobin. That's a multi year strategy to go into a new addressable market and we talked about how successful that has been. When you think about where do we what are we seeing in data and AI, that's a really great area, but we have an incredible ability to build those skills ourselves and the latest skills are not available at many of the companies that we're buying. And so we're very clear what is our business strategy, what are the capabilities that we need in order to drive that strategy and then we are disciplined about do we build it or we buy it.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

And so we are not seeing anything different with how we exercise that strategy and every year, we are dynamically evolving it based on the strategy and our needs.

James Faucette
James Faucette
Managing Director at Morgan Stanley

That's great articulation of that. And then my follow-up question is back on the point around organic growth. As we're exiting this fiscal year, are you anticipating that we're going to be able maintain that organic growth rate even on a year over year basis exiting this fiscal fourth quarter? We've got a few questions given, the amount of inorganic versus vis a vis your overall guided range of growth for the fiscal fourth quarter. Thanks.

Angie Park
Angie Park
CFO at Accenture

Hi, James. Thanks for the question. So look, when we as we think about FY 2026 and I get it, it's on the top of your mind. We'll update you in September on that. But let me just give you some underneath in terms of our guidance for the fourth quarter in particular.

Angie Park
Angie Park
CFO at Accenture

Julie mentioned that our goal was to return to organic growth this year and you're seeing that in our results. So as you think about our guidance for the year at 6% to 7%, that implies organic growth of 3% to 4%, right? So super important to understand. At the same time as you think about our fourth quarter guidance that we just gave you 1% to 5% that implies four percent at the top end of our range for organic growth.

James Faucette
James Faucette
Managing Director at Morgan Stanley

Thank you so much.

Angie Park
Angie Park
CFO at Accenture

Thanks. And

Operator

our next question today comes from Brian Bergen with TD Cowen. Please go ahead.

Bryan Bergin
Managing Director at TD Cowen

Hi, good morning. Thank you. So I appreciate the color on the growth headwind you provided on Doge for the fourth quarter. I'm curious how much clarity or just visibility you have right now on the potential cancellations or reductions of scope across the portfolio of the work that you do for the government, just given the timing of their fiscal year end. Really less concerned about this year, but just going forward, trying to just make sure we're all kind of aligned on expectations.

Bryan Bergin
Managing Director at TD Cowen

Should we kind of be thinking about that two point headwind in 4Q as a run rate or any other color you can share?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

We're going to update you on '26 at the end of next quarter. And it's just too early to be making kind of making those assumptions, right. But we're giving you the data as we see it. This is our best data point we have right now.

Bryan Bergin
Managing Director at TD Cowen

Okay. Understood. My follow-up on the growth model changes. So are there implications on the financial model here? Just understanding this is being made for client delivery on the integration of services, are there savings for you also on the back end and the delivery org?

Bryan Bergin
Managing Director at TD Cowen

Just in so if so, how should we be thinking about that?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Yes. The way I would think about the change in the growth model, it is being driven by what we see in the market in terms of our ability to grow. It is not being driven by cost cutting, right? And of course, we are always looking for efficiencies in that and we will look about those, but the driver is growth. And just a quick reminder, we have made growth model changes when there have been inflections in the market where we believe that working in a different way is going to fuel growth.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

So back in 2013, when we said every business would be a digital business, we put in a new growth model to incubate digital, to create strategy and to drive the digital transformation of Accenture. And from 2013 to 2019, which was our ambition, we grew at a CAGR of 9%. Then I became the CEO in 2019 and we put in March of twenty twenty the next growth model, which was all about scaling. We said the next decade is going to be about scaling digital transformation. We dissolved digital because it was everywhere and we said we need to be able to scale.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

So we went to a geographic P and L in order to be able to scale. From March of twenty twenty through March of twenty twenty five, that's been a 10% CAGR. As you sit here today, we all talk about the massive opportunity from AI. We have for the last three years demonstrated that our reinvention partner of choice strategy and our lead in Gen AI strategy is working and what is working about it is what makes us most unique that we have all of these different services that we've been bringing together for these big transactions. We have a proven strategy and now what we're saying is that's what's differentiating us in the market.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Let's bring it together so that we can more easily create those solutions and scale them to all of our clients across all of our sizes, across all of our markets and embed GenAI because the kinds of skills that you have to have whether you are in strategy or in technology or operations are much more common. We're uniquely able to embed that data and AI. And so this is all about the ability to rotate our offerings, our delivery and to bring the magic of Accenture that we're bringing to our largest clients across our client base faster and that's exactly what clients need today. We expect this to be fueling the next chapter of growth and we have got a very good track record of seeing where the market is going, making the big changes to get there and then executing very well.

Bryan Bergin
Managing Director at TD Cowen

That's clear. Thank you.

Operator

Thank you. And our next question today comes from Darrin Peller with Wolfe Research. Please go ahead.

Darrin Peller
Managing Director at Wolfe Research, LLC

Guys, thanks again. Maybe we just start off a little bit more around booking composition. And just if you can give us a little bit more sense as to what types of contracts from a size standpoint you're seeing and also where the priorities are from a budget standpoint from your customers at this point? And then I also want to kind of go in a little bit more into tariffs just because I know Julie, we talked in the past about uncertainty on the tariff side keeping customers on the sidelines. Are you seeing any change in that yet?

Darrin Peller
Managing Director at Wolfe Research, LLC

And what could be the change if we get more and more clarity as time goes on in terms of where contracts could be geographically?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Let me take the second part first, because I've been super clear. I am talking to CEOs every day and there was this whole narrative that about like a pause and sitting on the sidelines and I would tell you, it was very short, Our clients have moved from pause to focus and leapfrog. Focus being even more they want to do the biggest things that are going to make a difference, which is what plays into our strengths and that's what you continue to see in these large bookings and big deals that we're doing. Leapfrog is and this whole idea of AI, like how can we be the first, how can we lead? And you saw that for example, the platform we're building for Fincantaria, that is a first of its kind.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Now the nature of the work is really important to understand because it depends on where the company is. And so for example, we gave you the example of Air France KLM, which is all about migrating to the cloud and creating the CloudVent foundation because that's where their digital core is. Whereas there are other places where they're already in the cloud, but now we're building that cognitive brain. In almost all cases though, we're now doing things in parallel. So KLM Air France has got data AI embedded from the beginning, which is a shift than when you saw cloud migration a few years ago, right, because everybody wants to get to AI faster.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

That of course is why we're so differentiated because when we're now doing migrations, we're building in what is needed to have that cognitive brain. So it really depends on where the company is, but there's a lot of focus on cost and so you have us in some cases doing major deals where in one part of the organization, we're driving efficiencies, applying AI using our platforms like Synops, our managed services so they can leverage our people and our platforms and then reinvesting it in the core of the business, whether that's in how they're engaging with customers or in product development, in R and D, in the grid. So the themes though are tech, data and

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

AI, really rewiring organizations to working in new ways, being future ready so that no matter where they are on their curve, we're helping them get to the point where they can use AI.

Darrin Peller
Managing Director at Wolfe Research, LLC

That's really great color. Thank you. And then just a quick follow-up would just be around hiring plans. Maybe incorporating how you're thinking about the bench for AFS or what you need there. But just more broadly, if you can give us a sense of what you're looking at going forward? Thanks again guys.

Angie Park
Angie Park
CFO at Accenture

Thanks. Hey, Dan, it's Angie. Let me take that. And just on our headcount, we ended our Q3 with about 790,000 people. It was an increase of about 5% year over year.

Angie Park
Angie Park
CFO at Accenture

And you saw that our utilization ticked up to 92% and that was even with us delivering revenue above our guided range. As it relates to AFS and certainly they're in the mix and so it's all encompassing. I will say, I know that you guys think about headcount as part of a consideration for your model. And we've said for years that there's not a direct correlation between revenue and headcount. So the best way to think about the demand for our services is the guidance that we just gave.

Darrin Peller
Managing Director at Wolfe Research, LLC

Great. Thanks guys.

Angie Park
Angie Park
CFO at Accenture

Thanks.

Operator

Thank you. And our next question today comes from Ramsey El Assal with Barclays. Please go ahead.

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

Hi, thank you for taking my question. I wanted to follow-up on, I think Brian's question earlier about sort of Doge impact. What degree did federal contracting or sort of lack thereof way on bookings in the quarter? And I guess are the Q4 headwinds coming more from cancellations or is it the result of less new procurement for maybe shorter term deals?

Angie Park
Angie Park
CFO at Accenture

Ramsey. Good morning. As it relates to bookings, like we won't give you specific color on our context around the specificity of a part of our business. But for as you think about

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

yes, so right. Let me just take this quickly. So on as we said in earlier, federal was kind of immaterial on kind of all aspects of our bookings, sales, revenue in terms of negative impact. And then when you think about Q4, the impact is coming from both, right? We've talked about slower procurements, right?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

And we talked about cancellations. And so that's all of that is kind of in the mix when we anticipate what the impact is right Okay.

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

A follow-up from me, blockchain technology sort of shifted in and out of favor over the past few years. It seems to be having another moment currently. I'm just curious if you're seeing any renewed demand or interest from your clients on Blockchain, how you guys play in this space, maybe particularly in the financial services vertical, but elsewhere as well?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Yes. And in fact, blockchain comes back and then it gets renamed because people didn't like blockchain, etcetera. One of the things that you're pointing out though is that technology is continuing to involve quantum. There's a lot of interest in quantum. Blockchain continues to be part of solutions particularly as you said in the financial services vertical.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

I don't think you're going to start to see tons of headlines around that because people are so focused on AI. But in the places where it makes sense, particularly in banking, particularly in some of the as you start to see more industry wide solutions, the blockchain underlying blockchain technology is going to be important for security in that. We don't see it as like an independent big driver of our growth in the way that we see AI, because AI affects literally every part of the enterprise. It can drive growth and productivity. We see that as a very important enabling technology in certain industries and certain solutions and that's where our clients come to us to really be able to understand that.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

It's a mix but I would say quantum is as important to understand right now and both of them are not going to be independent big drivers in the near term, but very important that we understand them and put them in the right places.

Ramsey El-Assal
Ramsey El-Assal
Managing Director at Barclays

Thank you very much.

Angie Park
Angie Park
CFO at Accenture

Thanks.

Operator

Thank you. And our next question today comes from Jim Schneider with Goldman Sachs. Please go ahead.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Good morning. Thanks for taking my question. Julie, I was wondering if you could maybe kind of extend on your commentary around clients pivoting from pause to being maybe a little bit more proactive in their posture. Can you maybe talk about that in the context of your pipeline and your visibility in terms of bookings pipeline into the next quarter and beyond directionally relative to maybe last quarter?

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Yes. Have a strong pipeline overall going into Q4, very pleased with where we're seeing and you can see that reflected in raising the bottom of our guidance and where we see ourselves landing for the year. We continue to see the themes that I've been talking about, the cost, building the digital core, embedding AI, really getting into everything from both customer to deep into the industrial space, driving energy efficiency. I mean, it's really across the enterprise and those themes continue. We're seeing the same themes in the bookings ahead.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Thank you. And then as a follow-up, maybe one for Angie. Sort of a housekeeping question. I realize you do not sort of manage the business to gross margins, but instead operating margins. But there has been a little bit of gross margin pressure in the business last couple of quarters.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

I believe you may have called out some kind of increased use of subcontractors last quarter. I'm wondering if you saw that again this quarter and how you sort of expect that to trend over the next few quarters if that reverses? Thank you.

Angie Park
Angie Park
CFO at Accenture

Okay. Hi Jim, how are you? As it relates to gross margins, I did mention subcontractors last quarter because it was a driver. And as we look at as we think about our subs, we had shared that look, it can ebb and flow based upon the client work that we're doing. And so for this quarter, we didn't call it out because while they were a driver, they weren't a material driver overall to our gross margins.

Angie Park
Angie Park
CFO at Accenture

And importantly, I know that you're looking at gross margins and SG and A, but remember we look at our business from an operating margin standpoint overall. And so for us this quarter, we were very pleased with the 40 basis points of margin expansion and EPS growth of 12%. We work hard at it and we were super pleased with that result.

Jim Schneider
Jim Schneider
Senior Equity Analyst at Goldman Sachs

Thank you.

Alexia Quadrani
Alexia Quadrani
ED - IR at Accenture

Operator, we have time for one more question and then Julie will wrap up the call.

Operator

Yes, ma'am. Our final question today comes from Jason Kupferberg with Bank of America. Please go ahead.

Jason Kupferberg
Jason Kupferberg
Senior Equity Research Analyst at Bank of America Merrill Lynch

Good morning, guys. Thank you. I just wanted to start on the consulting side. I know the book to bill was one point zero in the quarter, and I think you typically target something a little higher. Your tone on the impact of macro on client decision making does sound a little bit better.

Jason Kupferberg
Jason Kupferberg
Senior Equity Research Analyst at Bank of America Merrill Lynch

So would you expect this metric to improve in Q4?

Angie Park
Angie Park
CFO at Accenture

Why don't I start, if that's okay? Good morning. And so when you look at our bookings overall, 19,700,000,000.0, 1.1 book to bill, we were very pleased. And you know that our bookings can be lumpy and you see that over time, which is why we focus on the trailing twelve months book to bill and we have a strong 1.2. As it relates to consulting, same point that I'm going to make, which is the trailing twelve months for consulting is a strong 1.1 and so we're very pleased with that overall.

Jason Kupferberg
Jason Kupferberg
Senior Equity Research Analyst at Bank of America Merrill Lynch

Okay. Just as a follow-up, some other IT services companies have been saying that upwards of 20% or so of their code is now being written by AI and wondering if something similar would be true for Accenture these days. And if so, are you sharing AI related savings back with clients and seeing them reinvest those savings in other projects with Accenture? Or are there instances where there's some net deflationary pressure on revenue? How's all that kind of netting out? Thank you.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Thanks. Well, first of all, our guidance takes into account how we deliver and any effects on how Gen AI is being built into our commercial models. And so again, that's why it's really important to like stay focused on what are we delivering. I've seen a lot of things out there and I think it kind of get confusing about code or not because as you think about Accenture, right, we're not doing a lot of Greenfield code because we're developing like new apps. We do very sophisticated, difficult integration.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

And so we actually look at how you use GenAI across the entire lifecycle and we are increasing and embracing as quickly as possible our use of it in delivery in order to be really at the cutting edge and we have built that into our guidance. Of course, you're also seeing our pricing improve as well this quarter. So remember, we keep talking about this. This kind of technology wave where it drives efficiency and allows us to deliver more efficiently is something we have managed over and over again. And the way that we manage it is by focusing on the value delivered to the clients and you are seeing that come through in our numbers.

Jason Kupferberg
Jason Kupferberg
Senior Equity Research Analyst at Bank of America Merrill Lynch

Thanks.

Julie Sweet
Julie Sweet
CEO & Chairman at Accenture

Great. Well, thanks everyone for joining. In closing, I just want to thank all of our shareholders for your continued trust and support. We are working every day to continue to earn that trust and a huge thank you to all of our people because you are why we are able to deliver these results. So thanks everyone and we'll see you next quarter.

Operator

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.

Executives
    • Alexia Quadrani
      Alexia Quadrani
      ED - IR
    • Julie Sweet
      Julie Sweet
      CEO & Chairman
    • Angie Park
      Angie Park
      CFO
Analysts
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