Accenture plc Q2 2026 earnings call

Thank you, operator, and thanks everyone for joining us today on our second quarter 2026 earnings announcements. As the operator just mentioned, I'm Alexia Quadrani, Managing Director and Head of Investor Relations. On today's call, you 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 issued a short time ago. Let me quickly outline the agenda for today's call. Julie will begin 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 second quarter. Julie will then provide a brief update on our market positioning before Angie provides our business outlook for the third quarter and full fiscal year 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 the quarterly reports on Form 10-Q and other SEC filings. 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 from 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 call. Now let me turn the call over to Julie.

Thank you, Alexia, and everyone joining us this morning. Thank you to our more than 786,000 people for your extraordinary work. We delivered another strong quarter with $18 billion of revenue growing 4% in local currency and once again taking significant market share. We had record bookings of $22.1 billion, bringing H1 bookings to a total of $43 billion. We had a record 41 clients with quarterly bookings greater than $100 million, bringing us to 74 of these bookings in the first half, 12 more than this time last year, demonstrating the continued demand for reinvention at scale. We delivered 30 basis points of operating margin expansion with strong EPS growth year-over-year, generating significant free cash flow while investing significantly in our business.

We closed 3 strategic acquisitions, deploying $1.6 billion of capital, and we now expect to deploy $5 billion in acquisitions this year with capacity to do more for the right opportunities. In double clicking on our revenue, our revenue growth was broad-based across geographic markets and types of work. Revenue from our top 10 ecosystem partners continues to outpace our overall growth and we are expanding these partnerships. We are on track in FY 2026 to more than double our bookings over FY 2025 from partnerships with our key emerging AI and data ecosystem partners. We delivered these strong results through the disciplined execution of our growth strategy as our market remains roughly the same. Our long-term growth strategy is to help our clients reinvent and to capture other new opportunities created by AI.

To accelerate this strategy, we are using two key competitive advantages, our strong balance sheet and our long history of successful acquisitions. Our goal with acquisitions is to more rapidly expand into higher growth areas with attractive margins, which will fuel organic growth and increasingly help us grow non-FTE related revenue. In H1, we invested in four areas. First, AI-powered transformation. Last week, we closed the acquisition of Faculty, a leading UK-based AI native services company with a decision intelligence product business that provides a platform for us to expand into new areas of unmet AI demand with non-FTE revenue. We also acquired two companies to accelerate our growth with Palantir, an emerging ecosystem partner. Deco in the UK, which focuses particularly in defense and public sector markets, and Ranger Data in the US, which works across industries. Second, AI enablers.

AI enablers include data centers, cybersecurity, energy infrastructure, and data. We acquired a 65% stake in DLB Associates, a data center engineering and consulting firm with high double-digit growth. We also acquired CyberCX, a leader in cybersecurity in Australia. We announced the acquisition of Ookla, a global leader in network intelligence, competitive benchmarking, and customer experience analytics. Ookla, with only 430 employees, generated $231 million of revenue in their calendar year 2025 through non-FTE subscription and licensing revenue models at an 8% year-over-year growth rate and with healthy margins accretive to Accenture. Third, high-growth secular trends. These trends include capital projects, defense and public sector, and education around AI, data, and tech. We acquired Orlade Group, a French capital projects firm which expands our presence in the energy, utilities, rail, and aerospace sectors, including nuclear power plants and power grids.

This acquisition is also part of our focus on key AI enablers because AI requires significant expansion of energy infrastructure. We also expanded LearnVantage, our business that is capturing the education opportunity through the acquisition of IDOMI in Japan. A portion of our LearnVantage business, leveraging our proprietary platforms, operates with a non-FTE commercial model, growing double digits. Finally, mid-market expansion. We made two mid-market acquisitions, Neuroflash and Total eBiz Solutions, and announced one, Cabel, to expand our presence in the mid-market, where we are experiencing higher revenue growth and a higher volume of smaller deal sizes that convert to revenue faster. As we delivered this quarter, we also are executing at speed on our talent strategy for the age of AI. We now have over 85,000 AI and data professionals, already exceeding our goal of 80,000 professionals by the end of fiscal 2026.

Thanks to our intentional talent strategy, we will hire more entry-level reinventors in FY 2026 than FY 2025, which is important for our financial model. Just as our clients must reinvent, so must Accenture. Our reinventors completed 13 million training hours this quarter alone, and 192,000 completed our Agentic AI Fundamentals program, co-created with Stanford's Institute for Human-Centered AI. After significant investment in training starting this year, we have made the use of the AI tools and contributions to helping Accenture become the most AI-enabled company in the world, now a formal part of our performance evaluation. Finally, we are pleased at the number of external recognitions of our broad-based strengths that we have received in the last several months. Please check out these recognitions in our earnings presentation for the quarter. Over to you, Angie.

Thank you, Julie. Thanks to all of you for joining us on today's call. We were very pleased with our second quarter results with record bookings for the quarter, revenue at the top end of our guided range, strong margin expansion, and robust free cash flow. These results demonstrate the resilience and durability of our business and continued execution of our strategy to be the reinvention partner for our clients. We delivered these results while continuing to invest for long-term market leadership and returning significant cash to shareholders. Now, let me summarize a few highlights for the quarter. Revenues grew 4% in local currency and were broad-based across geographic markets and types of work, reflecting the diversity of our business as we continue to take market share.

Operating margin was 13.8%, an increase of 30 basis points compared to Q2 results last year, and continues to include significant investments in our business and our people. We delivered EPS in the quarter of $2.93, which represents 4% growth compared to EPS last year. Finally, we delivered strong free cash flow of $3.7 billion and returned $2.7 billion to shareholders through repurchases and dividends this quarter. We also invested $1.6 billion, primarily attributed to 3 acquisitions in the quarter. With those high-level comments, let me turn to some of the details, starting with new bookings. New bookings were a record $22.1 billion for the quarter, representing 6% growth in US dollars and 1% growth in local currency, with an overall book-to-bill of 1.2.

Consulting bookings were $11.3 billion with a book-to-bill of 1.3. Managed services bookings were $10.8 billion with a book-to-bill of 1.2. Within bookings, the percentage of our work which is fixed price continues to increase over 60% in FY 2025. This reflects the rising importance of our proprietary platforms and clients' need for cost and delivery certainty, where our scale, experience, and financial strength matter. Revenues for the quarter were $18 billion, reflecting an 8% increase in US dollars and 4% in local currency at the top end of our FX-adjusted guided range, as the foreign exchange impact for the quarter was +4.4%, compared with a +3.5% estimate provided last quarter.

Consulting revenues for the quarter were $8.9 billion, up 7% in US dollars and 3% in local currency. Managed services revenues were $9.2 billion, up 10% in US dollars and 5% in local currency, driven by mid-single-digit growth in technology-managed services, which include application-managed services and infrastructure-managed services, and high single-digit growth in operations. Turning to our geographic markets. In the Americas, revenues grew 3% in local currency, led by growth in banking and capital markets, software and platforms, and industrials, partially offset by a decline in public service driven by our US federal business. Revenue growth was driven by the United States. Excluding the 2% impact from our federal business, Americas grew approximately 6% in local currency in the quarter.

In EMEA, we delivered 2% growth in local currency, driven by growth in insurance, life sciences, and public service. Revenue growth was driven by the United Kingdom and Italy. In Asia Pacific, revenue grew 10% in local currency, driven by growth in banking and capital markets, communications and media, and public service. Revenue growth was led by Japan and Australia. Moving down the income statement. Gross margin for the quarter was 30.3% compared with 29.9% for the same period last year. Sales and marketing expense for the quarter was 9.7% compared with 10.1% for the second quarter last year. General and administrative expense was 6.7% compared to 6.3% for the same quarter last year.

Operating income was $2.5 billion in the second quarter, reflecting a 13.8% operating margin, up 30 basis points compared with results in Q2 of last year. Our effective tax rate for the quarter was 24.3% compared with an effective tax rate of 20.4% for the second quarter last year. Diluted earnings per share were $2.93 compared with diluted earnings per share of $2.82 in the second quarter last year, reflecting 4% growth. Days services outstanding were 46 days compared to 51 days last quarter and 48 days in the second quarter of last year.

Free cash flow for the quarter was $3.7 billion, driven by cash generated by operating activities of $3.8 billion, net of property and equipment additions of $150 million. Our cash balance at February 28 was $9.4 billion compared with $11.5 billion at August 31. With regard to our ongoing objective to return cash to shareholders. In the second quarter, we accelerated our share buybacks and repurchased or redeemed 6.8 million shares for $1.7 billion at an average price of $246.09 per share. This brings our year-to-date total to $4 billion in repurchase or redeemed shares, which is a significant step up from the same time last year.

Also in February, we paid our second quarterly cash dividend of $1.63 per share, a 10% increase over last year for a total of $1 billion. Now back to you, Julie.

Thank you, Angie. I will start with the demand environment and then turn to why we see AI as a tailwind, which we believe will shape our growth over the next few years. We saw again this quarter, clients continuing to prioritize their most strategic and large-scale transformational programs, which positions us in the center of their reinvention agendas. As clients finalize their budgets going into calendar year 2026, we are seeing spending similar to 2025. Demand continues to be driven by a few major themes. First, clients are implementing foundational programs with our ecosystem partners to capture the full opportunity of AI. These typically involve cloud, security and data modernization, often combined with operating model and talent transformation. We continue to see at least one out of every two advanced AI projects lead to a data project.

Second, clients continue to look to reinvent faster, leverage our proprietary platforms and expertise, and achieve greater efficiencies through managed services across the enterprise. We see clients working with us to create more investment capacity to increase their spend in new areas. Third, clients with more advanced digital cores are starting to take on larger AI programs. We also are seeing more moving from proof of concept to production, while others are still at the beginning of their journey with another 100 clients or so initiating advanced AI projects with us this quarter. Across many of these programs, AI and data are now central, sometimes as the destination and increasingly as part of the work from day one.

A good example of these demand trends is how we are partnering with The Estée Lauder Companies, a global prestige beauty company, to advance its new one operating ecosystem and to drive a more connected, scalable and consumer-centric enterprise. Enabled by our platforms, we will collaborate with the company to transform how work gets done, leveraging AI and automation across the end-to-end value chain. Over time, this is designed to accelerate execution and enable teams to focus on driving innovation, consumer experience, and brand desirability. This work supports The Estée Lauder Companies in building the capabilities needed to activate new ways of working and aligning teams, technology and partners to enable the business to operate with greater agility. We see AI as a tailwind because it is helping us win more today and take market share, and it is creating new opportunities for growth over time.

We're continuing to take market share quarter after quarter because of the combination of our early leadership in advanced AI, our deep ecosystem partnerships with both established leaders and emerging players, and our decades of investments to be both deep in tech and relevant across the entire enterprise, from the back office to core operations to the front office. We play a critical role in the AI ecosystem. Foundation models provide the intelligence, and our role is helping clients understand what to deploy and when, how to integrate it into their systems, reimagine their processes, modernize their data and digital core, help redesign their operating models and do effective change management, and help build the capabilities and talent needed to scale across the enterprise. As the technology changes even more quickly, our clients are turning to us to help them navigate.

They also want us to help them go faster, sometimes by building their capabilities and other times by leveraging ours. Take SaaS implementations overall. Clients are continuing to modernize their tech stacks with SaaS, but they're now asking that new SaaS implementations be designed from day one to use processes that integrate both AI from the SaaS provider and other providers. Clients are more and more willing to do end-to-end transformation, all of which requires leadership in AI and SaaS, but it also requires deep industry and functional knowledge and the ability to work across the enterprise, not just in certain functions. They look to us to bring our point of view and experience on what the new tech stack should be, as well as on how their processes should change due to AI. We're seeing this across industries and across functions.

For example, in retail, service is no longer just about fixing problems. Customers expect a consistent experience every time, even on a massive scale. We're working with retailers to reinvent contact centers and design the new processes with agentic AI. This means partnering with us to develop agentic enterprise strategies and architecture foundations, which will serve as a platform to enable agentic solutions. We aren't simply upgrading contact center technology, we're reimagining service at scale. The future workflow involves digital agents and human agents operating as one coordinated team to serve customers. We're starting to bring together the best of major technology ecosystems from day one, such as a SaaS player and a hyperscaler, and creating agents that work across both platforms, creating leading-edge customized solutions.

This simplifies work for employees, delivers faster and more personalized support for customers, and creates a service engine designed to scale efficiently as the business grows. Our combination of strengths is helping us meet the needs of our clients today, and AI is opening up new opportunities where these strengths position us for growth in the long term. We see a long funnel of work as we have the advantage of the biggest client base in our industry, all of which we'll need to reinvent. Let's look at ERP. We have been the number one partner to all the major ERP ecosystem partners for years, and over the last several years, we've deployed modern ERP systems across hundreds of clients. When those systems were implemented, advanced AI did not yet exist. Now, those clients want to embed the new AI and data capabilities and transform their end-to-end processes.

For example, with one of our largest oil and gas clients, we're seeing a clear pattern. First, they modernized their digital core. Over several years, we partnered on a major ERP transformation to implement a cloud-based platform that simplifies operations, standardizes processes, and creates a single source of data across the enterprise. It was a significant multi-year investment. Now, with that foundation in place, they're investing again, embedding AI directly into the systems that run the business. This is not a separate layer of technology. It's intelligence built into core workflows across finance, supply chain, asset maintenance, and field operations. These capabilities analyze large volumes of data, initiate routine actions, and support better decisions in real time. The impact is tangible. Faster cycle times, fewer manual steps, lower operating costs, and stronger operational resilience. We're beginning to see this same sequence more broadly.

Modernization of the core, followed by AI-driven enhancement. Enterprise systems are becoming the platform that allows AI to deliver value at scale. Because of the work required across every process and every industry, we are starting with early leaders who have advanced technology stacks and want to pioneer. We believe that over the next 12 months or so, this opportunity will gain momentum. AI is helping us grow another strong business, cybersecurity. We see advanced AI as a catalyst to our cybersecurity business as the threat landscape expands and new tools emerge to protect and attack. AI is also unlocking opportunities in technology modernization, one of our key strengths. For example, for decades, parts of the technology stack, like the mainframe, have been considered too complex or too costly to modernize.

Today, advanced AI and new hardware capabilities are making mainframe modernization feasible, which we believe will open this major services market. We are also seeing significant opportunities in core operations, where AI is enabling us to make today's impossible, possible. This is one of the reasons why our custom systems integration work has been having a renaissance and is showing strong momentum. Core operations are where generally there are not as many SaaS providers because the needs are complex and industry-specific. These are areas where a lot of digitizing still needs to happen, like moving to the cloud and building data foundations. Where advanced AI is going to be able to provide solutions that are not available to clients today or are too expensive.

Examples include finance and risk, such as know your customer in banking, claims and insurance, prior authorization in healthcare and manufacturing, to name just a few. Advanced AI also is opening entirely new areas of growth for us because it is creating new opportunities for our clients and because making AI work requires entirely new capabilities. Take customer engagement. In Accenture Song, LLMs are driving the biggest revolution in retail since the advent of social media. While it is still very early, conversational and agentic commerce are changing how customers discover, evaluate, and purchase products. We are seeing strong demand, and we are uniquely positioned to serve our clients because of our ecosystem relationships and expertise in marketing, sales, and service. Radisson Hotel Group, a global hospitality company, is a clear example of marketing and commerce reinvention.

Over the past several years, we modernized their digital and data foundation, uniting brands on a single global platform. This created a real-time 360-degree customer view to enable personalized marketing across more than 1,500 hotels and over 30 languages and markets. Now we're putting agentic AI at the center of how demand is created and converted with Accenture Media Console, where AI agents optimize content based on traveler intent, streamline campaigns, and dynamically allocate budgets. We're also helping Radisson adapt to how discovery is evolving with agentic commerce, connecting live inventory and rates directly into conversational platforms so travelers can move seamlessly from discovery to bookings within AI-driven journeys. Since our collaboration began, Radisson's share of its direct bookings has tripled. This isn't incremental marketing improvement.

Thanks, Julie. Before I get into our business outlook, I want to share how the conflict in the Middle East is affecting our business and how we are reflecting it in our guidance. First, we have roughly 3,000 colleagues in the Middle East, a region which represented about 1% or $1 billion of revenue in FY 2025. Our colleagues are safe, and we are providing them with all the support we can. Currently, we are not seeing any significant financial impact. While we know the environment is more uncertain given the conflict, we always call it like we see it. Based upon the information we have today, we are increasing key elements of our full-year guidance. Our range for Q3 and the full year reflect our best view today of the potential impact of the conflict in H2.

It does not take into account a significant escalation or the occurrence of major economic disruption. Now let me turn to our business outlook. For the third quarter of fiscal 2026, we expect revenues to be in the range of $18.35 billion-$19 billion. This assumes the impact of FX will be approximately +2.5% compared to the third quarter of fiscal 2025. Our Q3 guidance reflects an estimated 1%-5% growth in local currency, including about a 1% impact from our federal business. Excluding the impact of federal, our revenue is expected to be an estimated 2%-6%.

For the full fiscal 2026, based upon how rates have been trending over the last few weeks, we continue to assume the impact of FX on our results in US dollars will be approximately +2% compared to fiscal 2025. For the full fiscal 2026, we now expect revenues to be in the range of 3%-5% growth in local currency over fiscal 2025, including an estimated 1% impact from our federal business. Excluding the impact of federal, our revenue is expected to be an estimated 4%-6%. This year, we continue to expect an inorganic contribution of about 1.5%. We have a strong pipeline of opportunities and now expect to invest about $5 billion in acquisitions this fiscal year. As Julie said, we could do more if the opportunities present themselves.

For adjusted operating margin, we continue to expect fiscal year 2026 to be 15.7%-15.9%, a 10-30 basis point expansion over adjusted fiscal 2025 results. We continue to expect our annual adjusted effective tax rate to be in the range of 23.5%-25.5%. This compares to an adjusted effective tax rate of 23.6% in fiscal 2025. We now expect our full year adjusted diluted earnings per share for fiscal 2026 to be in the range of $13.65-$13.90, or 6%-8% growth over adjusted fiscal 2025 results.

For the full fiscal 2026, we now expect operating cash flow to be in the range of $11.5 billion-$12.2 billion, property and equipment additions to now be approximately $700 million. We are raising our free cash flow guidance by $1 billion and now expect free cash flow to be in the range of $10.8 billion-$11.5 billion. Our free cash flow guidance reflects a very strong free cash flow to net income ratio of 1.3. We continue to expect to return at least $9.3 billion through dividends and share repurchases, an increase of $1 billion or 12% from fiscal 2025 as we remain committed to returning a substantial portion of our cash generated to our shareholders.

Our board of directors declared a quarterly cash dividend of $1.63 per share to be paid on May 15, a 10% increase over last year. As we move into the second half of the year, we remain focused on executing our strategy, investing for the future, and managing our business with rigor and discipline. With that, let's open it up so that 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 provide instructions to those on the call, please?