Accenture Q3 FY’23 Earnings
Executive Summary
While earnings and revenue beat estimates for Q3 FY’23, the market reaction was driven by full-year revenue growth guidance, which was pared down from 8%-10% to 8%-9%, driven by lowered forecasts in Q4. The talk of AI couldn’t deter from the fact that bookings for the quarter were below estimates and look flat year over year in Q4.
The biggest impacts on growth came from CMT, which declined 8% from Q3 FY’22, and Q4 forecasts “allow for CMT to get a little worse.” Additionally, other areas such as high tech, software and platforms, and banking and capital markets contributed to the lack of growth. The composition of the declines is attributed to “small deals,” and it was mentioned on the call that revenues will continue to be impacted if “small deals don’t come back.”
On the positive side, managed services is leading the way with double-digit growth this quarter which is expected to continue. Song, Cloud First, and Industry X were also called out for their double-digit growth.
I’ll get deeper into AI/Generative AI below (along with my first Gen AI image!!), but let’s talk about how big of a deal it was on the call. I counted how many times AI was mentioned, and my total was 72. Julie said this could be “another Cloud First” moment and that revenue should grow faster than the cloud business. Let’s see how this plays out, as I didn’t hear “Metaverse” mentioned once, which was a previous favorite!
People
- Accenture reported a total headcount of 731,868, a nearly 1% drop from last quarter (or 6,275 fewer employees). This is the first drop in headcount since 2020 and only the third drop since 2009
- Additionally, they don’t expect to see headcount growth in Q4
- Utilization remains at 91%, matching the utilization rate from the last five quarters (am I the only one surprised this number isn’t lower?)
The Numbers
- Revenue for the quarter increased 3% to $16.6B
- New bookings for the quarter were $17.25B, a 2% increase over Q3 FY’22, but below the Bloomberg estimate of $18.23B
- Q4 revenue is expected between $15.75B – $16.35B versus the analyst consensus of $16.35B
The Future
- While AI took the prize for the most attention, Julie reiterated the importance of the digital core to enable AI. She mentioned a new report that 50% of companies haven’t started their data or AI journey, and only 5% – 10% of companies are mature with their data/AI today.
- Sustainability was only mentioned a few times but didn’t suffer the same total defeat as the Metaverse
Generative AI
Gone are the days of “Applied Intelligence,” as Generative AI is now the industry standard. Accenture announced a $3B investment in AI just a few days ago, and on the call, they mentioned growing the AI workforce from 40k to 80k people!
While this area is very exciting and should provide substantial growth in the future, the previous quarter saw 100 Gen AI projects for total revenue of $100M, which is less than 1% of the total revenue for the quarter. The hype is here, but how fast the revenue will grow remains to be seen.
However, Julie did a great job explaining the prerequisites for Gen AI, which is a strong digital core. She mentioned this is already a focus for many clients and should continue to be so as companies prepare for AI.
What do you think, will Gen AI prove to be the next major driver of growth for Accenture, or will it face the same sad ending as the Metaverse?
And now, I present my AI-generated image:
