Accenture Reports Strong Performance In Second Quarter Despite Drop In New Bookings
Company posts increased revenue and profit alongside a robust operational outlook as client demand shifts.
The global professional services firm Accenture (NYSE: ACN) recently released its financial results for the second quarter of fiscal 2025, showcasing notable growth across various areas despite an unexpected dip in new bookings. Reporting for the period that ended February 28, Accenture announced revenues of $16.7 billion, marking an increase of 5% in U.S. dollars and 8.5% when adjusted for local currency. This performance met and slightly exceeded analyst expectations who had anticipated revenues of about $16.61 billion.
Accenture's CEO, Julie Sweet, expressed optimism about the company's trajectory, stating, “Our second quarter results demonstrate that we continue to deliver on our strategy to lead reinvention for our clients and return to strong growth in FY25, with broad-based growth across markets, industries, and the types of work our clients seek from us.”
Despite the company boasting strong overall performance, it was marred by a 3% decline in new bookings, which totaled $20.9 billion. The significant contribution from Generative AI initiatives, which tallied $1.4 billion in new bookings, highlighted a shift in client demand for innovative technological solutions.
Sweet noted the trust and confidence in Accenture’s unique capabilities, particularly emphasizing that 32 clients secured quarterly bookings exceeding $100 million, indicating robust ongoing demand from large organizations. This suggests a sustained interest in high-value projects, even amid the slower booking growth.
Additionally, the operating margin rose to 13.5%, a 50 basis point increase from last year. Diluted earnings per share were reported at $2.82, a 7% year-over-year increase, while free cash flow reached a strong $2.68 billion, which marked a 35% improvement from the same quarter last year.
In terms of shareholder returns, Accenture declared a quarterly cash dividend of $1.48 per share, representing an impressive 15% increase. The company also repurchased or redeemed 4 million shares for a total of approximately $1.4 billion.
Looking ahead, Accenture narrowed its full-year revenue growth forecast to between 5% and 7% in local currency, while also factoring in a negative foreign exchange impact of about 0.5%. The updated guidance for operating margin was adjusted to a range of 15.6% to 15.7%. Earnings per share forecasts for the full fiscal year 2025 remain optimistic, projecting a range between $12.55 and $12.79.
The day following the announcement, Accenture shares fell 8% in value shortly after the market opened. This reaction, while surprising given the strong quarterly performance, is largely attributed to the 3% drop in new bookings, which analysts suggest may foreshadow future revenue trends.
Despite exceeding expectations in earnings per share — beating the $2.81 analyst forecast — the declining new booking metric raised concerns about the sustainability of Accenture's revenue growth trajectory. Investors were also cautious, given that Accenture’s market capitalization stands at around $203 billion, a valuation that some analysts argue may be inflated given the company’s expected growth rate of around 9% annually.
Accenture’s forecast includes a growth projection of only 11% for fiscal year 2025, prompting skepticism regarding future stock performance. As such, some market watchers consider Accenture stock overpriced, with elevated costs relative to expected returns.
Certainly, the technology consultancy landscape remains competitive and dynamically evolving, particularly with an ongoing transition towards digital transformation and AI initiatives.
In the wake of the earnings report, Accenture’s management faces the challenge of translating current operational strength into sustainable growth in new bookings and client engagements. Looking forward, market analysts will closely monitor the company's strategies and performance, particularly in how it navigates these headwinds, to assess long-term investment viability.
Accenture’s results, while robust on the surface, underscore the importance of continuing to innovate and cater to evolving client needs amidst a challenging economic backdrop.
