Nasdaq-listed IT services provider Accenture increased its revenue forecast for fiscal year 2025 due to a lower impact from foreign exchange on its results in U.S. dollars, which will be approximately negative 0.5 percent compared with the previously expected impact of 1.5 percent.
Shares of the company rose 5% in premarket trading.
"We do not currently see an improvement in overall spending by our clients, particularly on smaller deals. When those market conditions improve, we will be well-positioned to capitalize on them as we continue to meet the demand for the critical programs our clients are prioritising," Chief Executive Julie Sweet told analysts after declaring the results.
The world's largest IT company's first-quarter revenue stood at $17.7 billion, beating analysts' estimates of $17.12 billion, according to data compiled by LSEG. The company said its "strong Q1FY25 results reflect broad-based revenue growth across all markets and industry groups".
Julie Sweet, chair and CEO, Accenture, said, the company's strategy to lead reinvention for clients while continuing to invest in business has given it a strong start to fiscal 2025. "On behalf of our leadership team, I want to thank our nearly 799,000 Accenture people whose commitment to our clients' success makes these results possible.”
Accenture's Key Numbers
First quarter new bookings were $18.7 billion, includes 30 quarterly client bookings of more than $100 million, and with Generative AI (Gen AI) new bookings at $1.2 billion.
In Q4, the company recorded Gen AI new bookings of $1 billion, and $3 billion for the FY24.
Businesses are investing heavily to scale their AI projects and digitise their core operations to boost efficiency and cut costs, which is helping companies such as Accenture.
Accenture and TCS are the only two big IT companies that have so far declared revenue from this nascent technology.
GAAP diluted earnings per share were $3.59, a 16 percent increase compared to $3.10 for the first quarter of fiscal 2024, and an increase of 10 percent over adjusted EPS of $3.27 for the first quarter last year.
The operating margin for the quarter stood at 16.7 percent, increasing 90 basis points (bps) year-on-year and 167 basis points sequentially. Bps are a unit of measure equal to one-hundredth of a percentage point.
Last month, Cognizant beat Street estimates on the revenue front on the back of an uptick in discretionary demand. This prompted Accenture's peer to raise its annual and quarterly revenue guidance across both the upper and lower ends of the range, reflecting improved revenue growth visibility.
Delving deeper
Geography-wise, quarterly revenue increased 9 percent year-on-year to $8.73 billion in North America, while revenue from the Europe, Middle East, and Africa region increased by 10 percent to $6.4 billion. Revenue from other markets also increased by 6 percent.
On the verticals front, the largest one - products business – increased 12 percent at $5.43 billion year-on-year in Q1. Next in line, the health & public service vertical increased by 13 percent to $3.81 billion year-on-year. Reversing the trend in the financial services vertical, it increased by 4 percent to $3.17 billion.
Meanwhile, Accenture expects revenues for the second quarter of fiscal 2025 to be in the range of 5 percent to 9 percent growth, assuming a negative 2.5 percent foreign exchange impact compared with the second quarter of fiscal 2024.
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