Accenture Q3 FY25 Results:Accenture reports strong Q3 FY25 earnings with revenue of $17.7 billion and EPS of $3.49, beating expectations. Generative AI bookings hit $1.5 billion, but total new bookings declined 6%, raising concerns about future growth. The company’s full-year guidance signals significant growth deceleration and weaker margins, leading to cautious investor sentiment despite robust free cash flow and operational strength.
Accenture Q3 FY25 Results: Strong Earnings but Weak Bookings Raise Concerns for Future Growth
Accenture has announced its financial results for the third quarter of fiscal year 2025, delivering a mixed bag of strong earnings performance but also revealing some worrying trends in new bookings that may weigh on its future growth prospects.
For Q3 FY25, Accenture reported revenues of $17.7 billion, an increase of 8% year-over-year in US dollars and 7% in local currency. This revenue figure came in ahead of analyst expectations of $17.3 billion, delivering a 2% revenue beat. On the bottom line, Accenture posted adjusted earnings per share (EPS) of $3.49, which exceeded consensus estimates of $3.32 by 5%, reflecting a 12% year-over-year growth in EPS.
The company reported net income of $2.24 billion for the quarter, supported by strong operational performance. Free cash flow remained robust at $3.5 billion, indicating solid financial health and liquidity. CEO Julie Sweet commented on the results, saying: “I am very pleased with our third quarter fiscal 2025 results, including our 30 clients with quarterly bookings greater than $100 million, broad-based growth and continued expansion of our leadership in Gen AI.
Companies need resilience and results, and we are laser-focused on delivering measurable value for our clients, which is fueling our growth and making a difference for us in the market. I want to thank our more than 790,000 people for all they do every day to deliver on the promise of technology and human ingenuity as only Accenture can.”
One of the highlights for the quarter was Accenture’s strong performance in the generative AI space. The company reported $1.5 billion in new generative AI bookings, underscoring growing demand for AI-driven solutions across industries. Generative AI remains a key area of focus for Accenture as enterprises look to leverage AI to transform their operations and improve efficiency.
However, while headline results were positive, new bookings presented a different picture. Accenture’s total new bookings came in at $19.7 billion, which was down 6% year-over-year in US dollars and 7% in local currency.
This decline in bookings has raised concerns among investors and analysts about the company’s growth pipeline. Despite strong client wins, the drop in new bookings signals potential softness in client demand and heightened competition in the IT services space.
Segment-wise, revenue remained well-diversified between consulting and managed services. The revenue by segment distribution shows that both business lines continue to contribute meaningfully to Accenture’s topline, maintaining a balanced portfolio.
From a quarterly trend perspective, the revenue chart shows Accenture’s consistent revenue performance over the last several quarters:
Q4 FY23: $16B
Q1 FY24: $16.28B
Q2 FY24: $15.8B
Q3 FY24: $16.4B
Q4 FY24: $16.8B
Q1 FY25: $17.7B
Q2 FY25: $16.78B
Q3 FY25: $17.7B
EPS followed a similar stable trend, with a small decline from Q2 FY25’s $3.59 to Q3 FY25’s $3.49, but still above expectations:
Q4 FY23: $2.71
Q1 FY24: $3.27
Q2 FY24: $2.77
Q3 FY24: $3.13
Q4 FY24: $2.79
Q1 FY25: $3.59
Q2 FY25: $2.82
Q3 FY25: $3.49
Despite the strong quarterly performance, the market reaction was subdued. Shares of Accenture were down approximately 3% in pre-market trading following the earnings release. Over the past year, Accenture stock has declined by 11%, reflecting investor concerns around future growth and margin pressures.
Adding to the caution, the company’s full-year guidance suggests a significant deceleration in growth as it heads into Q4 FY25. The guidance implies that growth will slow dramatically, potentially approaching flat growth with weaker margins. Some market commentators have expressed skepticism about the company’s future growth trajectory, suggesting that paying more than 12x to 15x peak cycle EPS for a mature IT outsourcing business like Accenture may not be justified. This would imply that the stock may still be overvalued by 35% to 50% compared to its long-term growth outlook.
Overall, while Accenture continues to showcase resilience with strong financial execution, robust free cash flow, and leadership in emerging technologies like generative AI, declining bookings and a cautious outlook for the remainder of FY25 are raising red flags for investors. The company will need to demonstrate sustained growth momentum, particularly in its high-potential AI segment, to offset slowing demand in its traditional IT outsourcing business and justify its current market valuation of $192 billion.
Disclaimer:
This article is for informational purposes only and should not be considered as investment advice. Always consult a licensed financial advisor before making any financial decisions. The author holds no responsibility for any losses incurred due to investment decisions based on this article.