Accenture plc Q4 2025 earnings call

Thank you, Operator, and thanks everyone for joining us today on our fourth quarter and full-year fiscal 2025 earnings announcement. As the Operator just mentioned, I'm Alexia Quadrani, Executive Director and Head of Investor Relations. On today's call, you will hear from Julie Sweet, our Chief Executive Officer, and Angie Park, our Chief Financial Officer. We hope you've had an opportunity to review the news release we issued a short time ago, and we also have an earnings presentation, which will be made available on our website after the call. Let me quickly outline the agenda for today's call. 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 fourth quarter and fiscal year.

Julie will then provide a brief update on the market position before Angie provides our business outlook for the first quarter and full-year fiscal 2026. 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-K and quarterly reports on Form 10-Q and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in 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 from non-GAAP financial measures where appropriate to GAAP in our news release or in the Investor Relations section on 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.

Thank you, Alexia, and to everyone joining this morning, and thank you to our more than 779,000 reinventors around the world for your extraordinary work and commitment to our clients. In fiscal year 2025, we delivered a strong year financially. We significantly elevated our competitive positioning, and we took our next big steps to position us for growth in the age of AI. We grew 7% last year, which was adding $5 billion in revenue, with over $80 billion in bookings. We did so against a macroeconomic backdrop that did not improve over FY24. Of that 7% growth, the majority was organic, and the growth was broad-based across markets, industries, and types of work.

We also delivered strong earnings per share growth and generated strong free cash flow, both above our guidance on an adjusted basis, and we returned a significant amount of cash to shareholders, an increase of 7% over FY24. We took share at more than 5X our investable basket. How did we do it? We built on the rapid shift in our business we made by the end of FY24 to address the challenging market conditions. We then took action to fully capitalize on the competitive advantages we have built over a long period of time to deliver these results. These advantages include our ecosystem partnerships, our breadth of capabilities, our deep and trusted client relationships, our track record of investing in new skills and rotating our business with successive technology revolutions, and of course, our ability to invest.

Our strategy for more than a decade has been to be the number one partner for the tech ecosystem, and it's serving us well. Technology is front and center for every client, and in FY25 we continued to be the number one partner for all of our top 10 ecosystem partners by revenue. 60% of our revenue is from work that we do with these partners, which grew 9%, outpacing our overall revenue growth in FY25. These partners are the world's largest technology companies by revenue, and they're seeking deeper and deeper partnerships with us as they look for help to turn their technology into business outcomes and scale the adoption of AI. We continue to be the reinvention partner of choice for our clients. Our deep and longstanding relationships mean we know our clients and their industries inside out.

Our global footprint and breadth of capability mean we can serve more of our clients' needs for large-scale transformations than any other player in the industry. We added 37 clients with quarterly bookings greater than $100 million in Q4 alone, bringing us to a record of 129 such bookings for the year, and we finished the year with 305 Diamond clients, our largest relationships. Our early and decisive decision in FY23 to invest significantly to become the leader in Gen AI with a $3 billion multi-year investment is clearly paying off as we capture this new area of spend for our clients. In FY25, we tripled our revenue over FY24 from Gen AI and increasingly Agentic AI to $2.7 billion, and we nearly doubled our Gen AI bookings to $5.9 billion.

As a reminder, these numbers only reflect revenue and bookings specifically related to advanced AI, which is Gen AI, Agentic AI, and physical AI, and do not include data, classical AI, or AI used in delivery of our services. We are now going to use the term advanced AI as it encompasses the latest developments that are starting to gain traction. In addition to all we are doing around advanced AI, for over a decade, we have made disciplined inorganic investments to expand our market and fuel organic growth. For example, our capital projects business, which was initially built through several acquisitions around the world, is now a $1.2 billion business for us, and in FY25, it grew 49% year on year, largely organically. While delivering these results, we also took the next big steps in our reinvention for the age of AI.

We are reinventing what we sell, how we deliver, how we partner, and how we operate Accenture. In short, on the ground, advanced AI is becoming a part of everything we do. Let's review our reinvention to date. By definition, every new wave of technology has a time where you have to train and retool. Accenture's core competency is to do that at scale. Our clients cannot possibly build all of the expertise they need on their own. They need us to go first and fast. In FY23, we had 40,000 AI and data professionals, with roughly 30 people working on a handful of Gen AI projects with negligible revenue.

Today, we have 77,000 AI and data professionals. We have worked on more than 6,000 advanced AI projects just this year, and we delivered meaningful revenue in FY25. We are also in the process of equipping all of our reinventors with the latest AI skills. Over 550,000 of our reinventors are already trained in the fundamentals of Gen AI. We have already significantly embedded advanced AI into key platforms like GenLizard so that we are now delivering differently for our clients. We reinvented our corporate functions to create additional investment capacity, among other benefits, and will now increasingly use advanced AI in the next chapter. In FY25, we focused our new actions on the ecosystem, our talent strategy, and our growth model.

We expanded our partnerships beyond the top 10 in AI and data and created new ones with companies that are becoming critical to many of our clients who also want to work with us to help them scale their relationships, and our revenue is growing in double digits with many of these partners. In FY26, we expect to increase our headcount overall across our three markets, including in the U.S. and Europe, reflecting the demand we see in our business. In addition to continuing to hire world-class talent, in FY25, we developed and are implementing a refreshed, robust three-pronged talent strategy to rotate our workforce. We are investing in upskilling our reinventors, which is our primary strategy. We are exiting on a compressed timeline. People work reskilling based on our experience is not a viable path for the skills we need.

We are continuously identifying areas of how we operate Accenture to drive more efficiencies, including through AI, in order to create more investment capacity. Finally, our growth model. On September 1, we launched reinvention services, which brings all of Accenture's capabilities into a single unit. Nearly 80% of our large deals are multi-service. The model, as we fully roll it out, will make it faster and simpler to sell and deliver everything Accenture offers and to rotate our offerings to embed more AI and data and equip our people. In summary, I am pleased with our strong results in FY25 and our positioning for FY26 and beyond. Over to you, Angie.

Thank you, Julie, and thanks to all of you for joining us on today's call. We were very pleased with our results in the fourth quarter, which were at the top of our guided range and completed another strong year for Accenture. Our results reflect our relentless focus to consistently deliver on our shareholder value proposition while investing for long-term market leadership and reinforce our role as a trusted reinvention partner for our clients and a leader in AI. Now, let me summarize a few highlights for the quarter. Revenues grew 4.5% in local currency. Excluding the 1.5% impact from our federal business, our revenues grew 6% in Q4, and we continue to take significant market share at more than 5X, reflecting the relevance of our services and the strength of our diversified portfolio and execution.

As a reminder, we assess market growth against our investable basket, which is roughly two dozen of our closest global public competitors, which represents about a third of our addressable market. We use a consistent methodology to compare our financial results to theirs, adjusted to exclude the impact of significant acquisitions through the date of their last publicly available results on a rolling four-quarter basis. Adjusted operating margin was 15.1%, an increase of 10 basis points compared to adjusted Q4 results last year. We continue to drive margin expansion while making significant investments in our business and our people. We delivered adjusted EPS in the quarter of $3.03, which represents 9% growth compared to adjusted EPS last year. Finally, we delivered free cash flow of $3.8 billion and returned $1.4 billion to shareholders through repurchases and dividends this quarter.

Before I move on to the details of the quarter, I want to spend a moment on the six-month business optimization program we initiated in Q4, for which we recorded a charge of $615 million and expect to record an additional approximately $250 million in Q1 for a total of approximately $865 million over the period. The business optimization program has two parts: one related to rapid talent rotation that Julie mentioned, which reflects severance associated with headcount reductions that we are making in a compressed timeline, and second, related to the divestiture of two acquisitions that are no longer aligned with our strategic priorities. These actions will result in cost savings, which will be reinvested in our people and our business. In FY26, we expect to increase our headcount overall across all three markets, including in the U.S. and in Europe, reflecting the demand we see in our business.

Now, let me turn to some of the details. New bookings were $21.3 billion for the quarter, representing 6% growth in U.S. dollars and 3% growth in local currency, which is on top of the 24% growth in Q4 of last year. Overall book-to-bill was $1.2. Consulting bookings were $8.9 billion with a book-to-bill of $1.0. Managed services bookings were $12.4 billion with a book-to-bill of $1.4. Turning now to revenues. Revenues for the quarter were $17.6 billion at the top of our guided range, reflecting a 7% increase in U.S. dollars and 4.5% in local currency. Consulting revenues for the quarter were $8.8 billion, up 6% in U.S. dollars and 3% in local currency. Managed services revenues were $8.8 billion, up 8% in U.S.

dollars and 6% in local currency, driven by high single-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 5% in local currency, led by growth in banking and capital markets, industrials, and software and platforms, partially offset by a decline in public service. Revenue growth was driven by the United States. Excluding the 3% impact from our federal business, Americas grew 8% in local currency in the quarter. In EMEA, we delivered 3% growth in local currency, led by growth in insurance, life sciences, utilities, and consumer goods, retail, and travel services, partially offset by a decline in public service. Revenue growth was driven by the United Kingdom and Spain, partially offset by a decline in Italy.

In Asia Pacific, revenues grew 6% in local currency, driven by growth in banking and capital markets, public service, and utilities, partially offset by a decline in energy. Revenue growth was led by Japan and Australia. Moving down the income statement, gross margin for the quarter was 31.9% compared with 32.5% for the same period last year. Sales and marketing expense for the quarter was 10.2% compared with 10.7% for the fourth quarter last year. General and administrative expense was 6.6% compared to 6.8% for the same quarter last year. Before I continue, I want to note that results in Q4 FY25 and Q4 FY24 include costs associated with business optimization actions, which impacted operating margin, tax rate, and EPS. The following comparisons exclude these impacts and reflect adjusted results.

Adjusted operating income was $2.7 billion in the fourth quarter, reflecting a 15.1% adjusted operating margin, up 10 basis points compared with adjusted results in Q4 last year. Our adjusted effective tax rate for the quarter was 27.9% compared with an adjusted effective tax rate of 26.2% for the fourth quarter last year. Adjusted diluted earnings per share were $3.03 compared with adjusted EPS of $2.79 in the fourth quarter last year, reflecting 9% growth. Day services outstanding were 47 days compared to 47 days last quarter and 46 days in the fourth quarter of last year. Free cash flow for the quarter was $3.8 billion, resulting from cash generated by operating activities of $3.9 billion, net of property and equipment additions of $108 million. Our cash balance at August 31 was $11.5 billion compared with $5 billion at August 31 last year.

With regards to our ongoing objective to return cash to shareholders in the fourth quarter, we repaid our fourth quarterly cash dividend of $1.48 per share for a total of $922 million. Now, I'd like to take a moment to summarize the year as we successfully executed our business to deliver or exceed all aspects of our original guidance that we provided last September on an adjusted basis. We delivered bookings of $80.6 billion, with a record 129 quarterly client bookings over $100 million and a book-to-bill of $1.2. Revenues of $69.7 billion for the year reflect growth of 7% in local currency, with nearly $5 billion in incremental revenue added this year. Our federal business was a 20 basis point headwind to our overall growth for the year. Consulting revenues were $35.1 billion, up 6% in U.S. dollars and 5% in local currency.

Managed services revenues were $34.6 billion, up 9% in both U.S. dollars and in local currency, driven by 10% growth in technology managed services and 6% growth in operations. The following comparisons exclude the impacts of business optimization actions I noted earlier and reflect adjusted results. Adjusted operating margin at 15.6% was a 10 basis point expansion over our adjusted FY24 results. Adjusted earnings per share were $12.93, reflecting 8% growth over adjusted FY24 EPS. Free cash flow was $10.9 billion, up 26% year over year, reflecting a very strong free cash flow to net income ratio of 1.4. With regards to our ongoing objective to return cash to shareholders, we returned $8.3 billion of cash to shareholders while investing approximately $1.5 billion across 23 acquisitions.

In closing, we feel good about how we managed our business while navigating the macro environment in 2025, and now we are laser-focused on executing and delivering fiscal 2026. Back to you, Julie.

Thank you, Angie. Today, we've worked across every major market with more than 9,000 clients, including the world's largest companies, three quarters of the Fortune Global 100 and 500. As we look at the markets, we have not seen any meaningful change, positive or negative, in the overall market. We are focused on delivering results regardless of the market conditions by being the most relevant to our clients. Relevance today requires leadership in AI. We're working with companies early in their journey to use AI, which want our help to get them AI ready and to leverage our assets and platforms to accelerate their ability to deploy AI, as well as to help them do what they can now to use AI, even when they're not fully ready across the enterprise.

We also are working with companies far along their journey to be AI ready and wanting to be the first to change the game with AI, even as its potential is still emerging. The technology itself is new and rapidly changing, so across companies, they need help in understanding the tech landscape. This is where we are in the age of AI. It is very early innings, however you look at it, which means there is massive opportunity ahead for our clients, our ecosystem partners, and us. It is well recognized that advanced AI has taken the mindshare of CEOs, the C-suite, and boards faster than any technology development we've seen in the past two decades. At the same time, as reported widely, value realization has been underwhelming for many, and enterprise adoption at scale is slow other than with digital natives.

This is why our clients are turning to us. We know that the gap between mindshare and faster actual adoption is because the enterprise reinvention required to truly unlock the value of advanced AI is hard and has significant costs. There is a huge difference between how we're all using AI in our individual lives that is incredibly easy and what it takes to use it in an enterprise. The opportunity for AI is at the intersection of business strategy and tech and org readiness. For most companies, the biggest gap between mindshare and adoption is tech and org readiness. We're still in the thick of cloud, ERP, and security modernization. Data preparedness is nascent in many companies, and companies grapple with fragmented processes and siloed organizations. Generations of leaders need new skills to understand how AI should inform their business strategy.

The workforce needs new skills to use AI, and new talent strategies and related competencies must be developed. Helping clients with all of this work is what is driving our growth, and our pipeline of large-scale transformations continues to grow. We're also starting to see early signals of an inflection point, with more clients looking for true enterprise-wide plans and activation and seeking out our successful experience with scaling in enterprises and at Accenture. Two years into this AI journey, we also are seeing a pattern in how AI can expand our opportunities with our clients. As some companies are making progress in creating AI readiness, it leads to even more work. Longstanding partnerships are deepening, and the demand for transformation is accelerating. For example, take a major financial services client we've worked with for over a decade. Their reinvention began with digital operations and cloud modernization.

Now they've asked us to modernize their data estate, the foundation for scaling AI across the enterprise, from the contact center and marketing to finance and the trading floor. As we begin to implement AI into many facets of their business, our relationship continues to grow as we retire legacy systems, transform core functions like HR and risk, and build AI-centric capabilities to keep them ahead of shifting customer expectations. This has meaningfully expanded the amount of work we do for this client, and in fact, over the past five years, the value of our contract has more than doubled. We're seeing more stories like this across our portfolio, where AI is extending across the enterprise and adjacent work is following. Our contracts are expanding, and our client relationships are compounding, creating a powerful, sustainable growth engine for Accenture. Building the digital core remains our biggest growth driver.

Only now, our clients understand that Accenture is bringing even more capabilities because we understand how the digital core will enable them to use advanced AI, and advanced AI is now a new catalyst for doing the large-scale transformations of the digital core in the first place. Taking an industry lens, let's look at banking. In banking, investment in digital core modernization remains strong, with cloud adoption accelerating as AI demand grows. Here's what it looks like in practice, and I'm particularly proud of this work because the scale is frankly breathtaking, and we were trusted by this client with mission-critical work. The Bank of England's real-time gross settlement service, which lies at the heart of most electronic payments in the UK, was rebuilt on a modern digital core using private cloud and end-to-end automation. This upgrade improved security, reliability, speed, and scale.

The system now offers faster onboarding and secure APIs, giving more financial institutions safe access. It processes about $1 trillion in transactions every day, and in its first five months up to today, it has handled 22.5 million transactions worth $110 trillion. For people, that means big payments like buying a home go through quickly and safely. This modernization strengthens a national platform, reducing risk and creating a trusted foundation for innovation. Now the system is ready for what's next, even the potential for the market adopting AI-driven payment services. Now let's take a horizontal lens across industries with security. Security is essential to a digital core, which is reflected in our 16% growth for the year. We're seeing increased demand for advanced cyber protection and more integrated intelligent security solutions that can fully harness AI's potential and keep pace with emerging threats.

To further strengthen our position, in the past quarter, we agreed to acquire CyberCX, our largest cybersecurity acquisition to date, which helps us in geographic expansion, bringing approximately 1,400 specialists in APAC and also bringing AI-powered security platforms which are applicable globally. We also acquired IAM Concepts, a Canadian identity security specialist serving critical infrastructure, expanding the depth and regional reach of our managed security and identity capabilities that underpin secure AI adoption. Now let's look through the lens of our unique industry, functional process, and talent and org capabilities. These, coupled with our technology expertise, are making a difference to our clients. These next two examples also demonstrate the pattern we're seeing in expanding our relationships due to advanced AI. Ecolab, a global sustainability leader, has been a client for 15 years. Three years ago, we partnered with Ecolab to lay the foundation for their growth transformation.

One Ecolab, bringing the company together as one team to better serve customers, drive cross-sell and upsell, and improve operational efficiency. A year into that journey, we started working with Ecolab and its leadership to accelerate value with AI. Instead of executing one-off use cases, we redesigned the entire lead-to-cash process, the steps from generating a lead to collecting payment using nine scaled Agentic AI agents. These agents clean core data, resolve billing errors, and automatically match customer payments to the right billing invoices. In cash application alone, work that used to be 100% manual is now about 60% automated, reducing errors and speeding up processes. By using AI to streamline operations, Ecolab is on a path to deliver an estimated 5% to 7% sales growth and 20% operating income margin without increasing costs at the same pace.

Big picture, it supports the company's mission to deliver water, hygiene, and infection prevention solutions to more customers worldwide. We're partnering with a leading energy company, which has been a client for nearly two decades, to reinvent field operations with cloud, data, and Gen AI. The challenge was scale, safety, cost, and sustainability, running thousands of wells with fragmented data and a leaner field workforce. We unified data from more than 25 legacy systems into a single cloud-based digital core. On top of that, we built AI-powered scaled digital twins that monitor, optimize, and control the field in real time using our Accenture Industrial Intelligence Suite solution. That live view speeds decisions and improves safety, often without sending a technician on site, while emissions are continuously monitored for compliance.

This solution is expected to reduce lost production by up to 2% to 4%, increase productivity by up to 28%, and decrease costs by up to 22%. Field exposure and unplanned visits are also reduced, and emissions are expected to be lower. People can now focus on higher-value work, and the business can respond faster to a changing energy landscape. Our scaled examples set the North Star. Here's an example of how our clients are starting to work with us for broader AI adoption across multiple areas to enable their business strategy. We've partnered with UOB, a leading bank in ASEAN, for nearly two decades on various initiatives, including multi-country application services rollouts to omnichannel enhancement. Today, we're helping them scale Gen AI and use agentic AI to transform customer experience and core operations.

Using our AI refinery platform, we're supporting them in powering high-value use cases in customer engagement, risk management, and workforce enablement. This transformation enables faster, more personalized service, strengthens decision-making with predictive insights, accelerates response times, and enhances operational resilience. Together, we're positioning UOB to lead and create sustainable impact in the financial services industry. Now, an important part of our growth strategy is to be relevant to the core of our clients' industries, such as digital manufacturing, and to be relevant to their growth agenda. Industry X grew 10% and Song grew 8% in FY25. Both follow a similar pattern of needing a strong digital core and reinvention. The digitization of digital manufacturing and engineering and the use of AI and data to reinvent customer experience is still in the early days. We're seeing strong demand across both areas and continue to invest both organically and inorganically.

Thanks, Julie. Now let me turn to our business outlook. For the first quarter of fiscal 2026, we expect revenues to be in the range of $18.1 billion to $18.75 billion. This assumes the impact of FX will be approximately positive 1% compared to the first quarter of fiscal 2025. Our Q1 guidance reflects an estimated 1% to 5% growth, including about a 1.5% impact from our federal business, with AFS contracting mid-teens. For the full fiscal year 2026, based upon how the rates have been trending over the last few weeks, we currently assume the impact of FX on our results in U.S. dollars will be approximately positive 2% compared to fiscal 2025. For the full fiscal 2026, we expect revenue to be in the range of 2% to 5% growth in local currency over fiscal 2025, including an estimated 1% to 1.5% impact from our federal business.

Excluding the impact of federal, our revenue is expected to be an estimated 3% to 6%. This year, we expect an inorganic contribution of about 1.5%, and we expect to invest about $3 billion in acquisitions this fiscal year. For adjusted operating margin, we expect fiscal year 2026 to be 15.7% to 15.9%, a 10 to 30 basis point expansion over adjusted fiscal 2025 results. We expect our annual adjusted tax rate, effective tax rate, to be in the range of 23.5% to 25.5%. This compares to an adjusted effective tax rate of 23.6% in fiscal 2025. We expect our full-year adjusted diluted earnings per share for fiscal 2026 to be in the range of $13.52 to $13.90, or 5% to 8% growth over adjusted fiscal 2025 results.

For the full fiscal 2026, we expect operating cash flow to be in the range of $10.8 billion to $11.5 billion, property and equipment additions to be approximately $1 billion, and free cash flow to be in the range of $9.8 billion to $10.5 billion. Our free cash flow guidance reflects a very strong free cash flow to net income ratio of 1.2. We expect to return at least $9.3 billion through dividends and share repurchases, an increase of $1 billion, or 12% from fiscal 2025. Our board of directors declared a quarterly cash dividend of $1.63 per share to be paid on November 14, a 10% increase over last year, and approved $5 billion of additional share repurchase authority. We remain committed to returning a substantial portion of our cash generated to shareholders. With that, let's open it up so we can take your questions. Alexia.

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