Exchange: NYSE | Sector: Technology | Industry: Information Technology Services
Q4 2024
Published: Oct 10, 2024
Earnings Highlights
Revenue of $16.41B up 2.6% year-over-year
EPS of $2.66 increased by 22% from previous year
Gross margin of 32.5%
Net income of 1.68B
"GenAI is the most transformative technology of the next decade, and AI will be the new digital—the full value will come from strategies built on both productivity and growth." - Julie Sweet
Accenture plc (ACN) Q4 2024 Earnings Review: GenAI-Driven Reinvention, Solid Bookings, and 2025 Outlook
Executive Summary
Accenture delivered a resilient Q4 FY2024, underscoring the durability of its business model and the strategic shift toward large-scale reinventions anchored by GenAI. Revenue of $16.406 billion rose 5% in local currency year over year, supported by broad-based demand across seven of 13 industries and a return to growth in consulting activities. New bookings of $20.1 billion yielded a book-to-bill of 1.2, signaling solid revenue visibility as Accenture moves further into megadeals (125 client bookings over $100 million for the year). Management framed GenAI as a transformational catalyst, positioning Accenture to capitalize on the AI-enabled productivity and growth opportunities across industries. FY2024 bookings reached a record $81.2 billion with revenue of $64.9 billion, a 2% local-currency expansion, while delivering a 15.5% adjusted operating margin and $11.95 in adjusted EPS for the year. The company returned substantial capital to shareholders (approx. $7.8B) and completed 46 acquisitions, reinforcing its inorganic growth engine.
For FY2025, management guided to 3%–6% local-currency revenue growth (inclusive of just over 3% inorganic contribution), an adjusted operating margin of 15.6%–15.8%, a tax rate of 22.5%–24.5%, and diluted EPS of $12.55–$12.91. Free cash flow is expected in the $8.8–$9.5 billion range, with at least $8.3 billion returned to shareholders. The plan envisions roughly $3 billion of acquisitions and continued investment in GenAI-related capabilities, data, and talent. While macro discretionary spend remains a risk, Accenture’s ongoing focus on large-scale transformations, its global AI workforce expansion (targeting ~80,000 practitioners by FY26), and its LearnVantage upskilling platform are poised to support margin resilience and growth. Investors should monitor macro spend intensity, AI data readiness, execution of GenAI engagements, and the cadence of acquisitions as key drivers of the FY25 trajectory.
Key Performance Indicators
Revenue
16.41B
QoQ: -0.37% | YoY:2.63%
Gross Profit
5.34B
32.53% margin
QoQ: -3.11% | YoY:3.01%
Operating Income
2.35B
QoQ: -13.42% | YoY:23.04%
Net Income
1.68B
QoQ: -12.83% | YoY:22.68%
EPS
2.66
QoQ: -13.64% | YoY:22.02%
Revenue Trend
Margin Analysis
Key Insights
Q4 FY2024 revenue: $16.406B, up 5% in local currency; gross margin 32.5%; operating margin 14.35%; adjusted operating margin 15.00% (prior-year Q4: 15.0% adjusted).
Q4 FY2024 adjusted EPS: $2.79 (up 3% YoY); GAAP EPS not provided in the transcript, but adjusted metrics were emphasized.
Quarterly and annual highlights:
- Q4 FY2024 revenue: $16.406B, up 5% in local currency; gross margin 32.5%; operating margin 14.35%; adjusted operating margin 15.00% (prior-year Q4: 15.0% adjusted).
- Q4 FY2024 adjusted EPS: $2.79 (up 3% YoY); GAAP EPS not provided in the transcript, but adjusted metrics were emphasized.
- Q4 bookings: $20.1B; book-to-bill: 1.2; consulting bookings: $8.6B; managed services bookings: $11.6B.
- Q4 free cash flow: $3.2B; cash from operations: $3.4B; cash balance at period end: $5.0B.
- Full-year FY2024: Revenue $64.9B (local currency +2%); total bookings $81.2B (14% LC growth); adjusted operating margin 15.5% (+10 bps); adjusted EPS $11.95 (+2%); free cash flow $8.6B; cash return to shareholders: $7.8B; acquisitions: 46 deals; learnings and development investment: $1.1B; R&D: $1.2B.
- Headcount and capability: AI workforce ~57,000 (goal 80,000 by FY26); training hours ~44 million (up ~10%, driven by GenAI training); LearnVantage launched to upskill clients’ workforces.
- Balance sheet and liquidity: net cash position (net debt negative) of approximately $884M; goodwill and intangible assets total ~$24.0B; total assets ~$55.9B; strong capital return policy with ongoing buybacks and growing dividends.
- FY25 guidance highlights: Q1 revenue guidance $16.85–$17.45B; full-year revenue growth 3%–6% in LC; acquisitions around $3B; operating margin 15.6%–15.8%; effective tax rate 22.5%–24.5%; diluted EPS $12.55–$12.91; capex ~$0.6B; FCF $8.8–$9.5B; FCF to net income ratio 1.1–1.2; minimum annual dividend and buyback of $8.3B; modest debt issuance as part of capital structure optimization.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
16.41B
2.63%
-0.37%
Gross Profit
5.34B
3.01%
-3.11%
Operating Income
2.35B
23.04%
-13.42%
Net Income
1.68B
22.68%
-12.83%
EPS
2.66
22.02%
-13.64%
Key Financial Ratios
currentRatio
1.1
grossProfitMargin
32.5%
operatingProfitMargin
14.3%
netProfitMargin
10.3%
returnOnAssets
3.01%
returnOnEquity
5.95%
debtEquityRatio
0.15
operatingCashFlowPerShare
$5.35
freeCashFlowPerShare
$5.01
dividendPayoutRatio
47.9%
priceToBookRatio
7.66
priceEarningsRatio
32.14
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management-market themes and quotes:
- Strategy and GenAI as a growth catalyst: Julie Sweet stated, GenAI will be the transformative technology of the next decade, likening AI to the 'new digital' and emphasizing that 'the full value will only come from strategies built on both productivity and growth.' (Transcript: Julie Sweet)
- Growth through reinvention and large-scale transformations: Julie highlighted that Accenture's reinvention strategy centers on 'large scale transformations' and the firm’s ability to connect strategy, consulting, industry X, technology, and operations to deliver comprehensive client solutions (Transcript: Julie Sweet).
- Bookings momentum and megadeals: KC McClure noted Q4 bookings of $20.1B with an overall book-to-bill of 1.2, and 125 quarterly client bookings over $100M for the year, underscoring the megadeals-driven mix of revenue. (Transcript: KC McClure)
- Organic growth and margin discipline: KC and Angie reaffirmed that Q4 organic revenue was slightly positive, and that management is guiding to a 15.6%–15.8% operating margin for FY25, with a 10–30 bp expansion versus FY24. (Transcript: KC McClure; Angie Park)
- Acquisition strategy and pipeline: Julie and Angie emphasized a backend-loaded inorganic plan of roughly $3B for FY25, reflecting pipeline-driven investments rather than a heavy front-loaded cadence. (Transcript: Angie Park; Julie Sweet)
- Talent and learning: Julie discussed a long-term talent strategy centered on being a talent creator, with LearnVantage to reskill clients’ workforces and a push to grow the AI workforce from 57k toward 80k by FY26, supported by 44M training hours in FY24. (Transcript: Julie Sweet)
- M&A and capital allocation: Angie explained inorganic contribution of a bit over 3% for FY25 given current plan and timing, and that equity returns will continue to be a core component of capital allocation with modest debt raising to optimize liquidity. (Transcript: Angie Park)
GenAI is the most transformative technology of the next decade, and AI will be the new digital—the full value will come from strategies built on both productivity and growth.
— Julie Sweet
We see AI as the new digital. Like digital, AI is both the technology and a new way of working, and the full value will only come from strategies built on both productivity and growth.
— Julie Sweet
Forward Guidance
Outlook assessment and rationale:
- Revenue trajectory: FY25 guidance implies 3%–6% LC growth (with a bit more than 3% inorganic contribution). At the bottom end, organic growth could be flat or slightly negative if discretionary IT spend deteriorates; at the top end, organic growth could approach mid-single digits driven by larger Megadeals and robust demand in high-growth verticals. Angie Park characterized the organic component as broadly momentum-driven across markets and industries, with consulting and managed services both expected to grow in the low- to mid-single digits for the year. (Transcript: Angie Park; Julie Sweet)
- Margin and profitability: FY25 adjusted operating margin guide of 15.6%–15.8% suggests a modest expansion versus FY24’s 15.5% adjusted margin, supported by ongoing efficiency initiatives and the reinvestment cadence in GenAI and talent. The company plans to invest in acquisitions (~$3B) while preserving a low net leverage profile, implying modest capex and stylized financial flexibility. (Transcript: Angie Park; KC McClure)
- Cash flow and returns: Free cash flow guidance of $8.8–$9.5B and total cash returns of at least $8.3B signal continued capital discipline and shareholder-friendly actions, even as M&A activity persists. (Transcript: Angie Park)
- Risk factors and monitoring: Key uncertainty remains the macro discretionary spend environment, FX movements, and integration risks associated with a large, ongoing acquisition program. The guidance explicitly embeds FX tailwinds of roughly +1.5% in USD versus FY24 and accounts for potential changes in macro demand and client budgets. Investors should monitor January–February budget cycles, client demand by industry, and the execution cadence of GenAI engagements as leading indicators of FY25 traction. (Transcript: Angie Park; Julie Sweet)
- Bottom line assessment: The FY25 roadmap balances growth through megadeals and GenAI-enabled offerings with capital discipline and a prudent M&A cadence. If the macro environment remains cautious but with accelerating enterprise data readiness and AI-driven transformation, Accenture’s positioning as a reinvention partner positions it to outperform in select high-ROI verticals while maintaining margin resilience.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
ACN Focus
32.53%
14.30%
5.95%
32.14%
EPAM
30.40%
10.90%
2.85%
32.15%
IBM
59.50%
22.20%
10.70%
17.46%
INFY
29.50%
20.60%
9.08%
18.97%
CTSH
35.10%
14.80%
3.79%
17.46%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Overall investment thesis remains positive due to GenAI-driven reinvention, a diversified services mix, and strong cash generation. Accenture’s FY25 guidance reflects a balanced approach: modest organic growth, meaningful inorganic contribution, and margin discipline, supported by substantial free cash flow and a large-scale, backlog-backed revenue trajectory. The company’s strategy to invest in GenAI capabilities, talent, and LearnVantage positions it well to monetize data readiness and AI-enabled productivity for clients across industries. Key factors to monitor include the pace of megadeals converting to revenue, data readiness and governance in client environments, the cadence and profitability of acquisitions, and macro-driven changes in client IT budgets. If discretionary spending improves or remains stable, Accenture could outperform the guided midpoint given its megadeal backlog and AI-enabled transformation capabilities; if budgets deteriorate, downside risk to the lower end of the guidance exists. Overall, the stock could trade at a premium given its growth profile, cash generation, and strategic AI emphasis, with a watchful eye on execution risk and macro demand signals.
Key Investment Factors
Growth Potential
Growth opportunities are anchored in: (1) GenAI-enabled reinventions across Financial Services, Telecom, Security, and Consumer industries; (2) expansion of the digital core via cloud migrations, modernization, and data readiness; (3) continued large-scale transformation deals and an elevated megadeals mix (125 deals >$100M in FY24, 19 more than prior year); (4) disciplined acquisitions (~$3B expected in FY25) to expand capabilities, geographic reach (e.g., Europe and growth markets), and strategic platforms (e.g., LearnVantage, security, industry X). Management highlighted bookings strength and the potential for higher data-driven monetization as clients progress from PoCs to large-scale deployments. (Transcript: Julie Sweet; Angie Park)
Profitability Risk
Key downside risks include: (1) a sustained deterioration in discretionary IT spending, which could compress the top end of the revenue guidance; (2) execution risk from integrating a high cadence of acquisitions (46 in FY24, ~3B planned in FY25) and potential dilution of profitability if integration costs rise; (3) reliance on GenAI data readiness and client prioritization, which could delay implementation schedules; (4) macro and currency headwinds (FX tailwinds assumed, but material swings could affect reported results); (5) competition for talent in a tight labor market, potentially impacting utilization and wage inflation; (6) regulatory and geopolitical risks impacting cross-border delivery and client decisions. (Transcript: Angie Park; Julie Sweet; KC McClure)
Financial Position
Accenture maintains a fortress balance sheet with robust cash generation and a negative net debt position (~$0.88B net cash). As of Q4 FY24: cash and cash equivalents around $5.0B; total assets ~$55.9B; goodwill and intangibles ~$24.0B; long-term debt ~$2.45B; total debt ~$4.12B; total stockholders’ equity ~$28.29B. Free cash flow of $3.2B in Q4 and $8.6B for FY24 underscores strong cash conversion (FCF-to-net-income ratio of approximately 1.2x for FY24 per management). The company targeted a modest 3%–6% revenue growth with a lean leverage profile, and it reaffirmed a plan to deploy cash for acquisitions and shareholder returns, maintaining capital structure flexibility with potential modest debt issuance. (Balance sheet data; Transcript: KC McClure; Angie Park; Julie Sweet)
SWOT Analysis
Strengths
Scale and diversified, multi-service platform spanning strategy, consulting, technology, and operations
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