GenAI turns into all-weather tailwind for Accenture amid deal-making slowdown

During the analyst call on June 20, Accenture Chair and CEO Julie Sweet noted that the global economic and geopolitical environment remains significantly more uncertain than it was a year ago.

“In every boardroom, in every industry, our clients are not facing a single challenge. They are facing everything at once. Economic volatility. Geopolitical complexity. Major shifts in customer behaviour”, she said.  

As the Dublin-headquartered IT services and consulting giant announced its financial results for the third quarter of fiscal 2025 (ending August 31), it reported revenues of $17.7 billion, marking an 8% year-on-year increase. However, new bookings continued to decline.

For the quarter, new bookings stood at $19.7 billion — a drop of over 6% compared to $21.1 billion in the same period last year. While new deal activity remained flat in Q1 with a modest 1% year-on-year growth, it slipped by 3% in Q2. This marks the second consecutive quarter of decline in new bookings for the company.

Despite the softness in deal wins, Accenture raised the lower end of its full-year revenue growth guidance to 5%, up from the previously stated 4%, while maintaining the upper end at 7%.

As Indian markets opened this Monday, large-cap IT stocks such as Infosys, HCL Tech, TCS, and Wipro all took a hit, taking cue from Accenture’s decline in new deal bookings. However, analysts at Nomura, in their recent note highlighting Accenture’s revenue growth momentum in the Financial Services sector, said, “We expect the growth momentum in the financial services vertical to continue in the near term for Indian IT services companies. There has been no meaningful deterioration of the demand environment since the 90-day pause on tariff imposition by the U.S. administration in early April. However, a sharp growth revival hinges on macroeconomic improvement, particularly in the U.S”.  

Another brokerage house, Motilal Oswal, in its read-through of Accenture’s results, said that the company’s better-than-expected revenue and the upward revision in guidance bode well for Indian IT. However, it also cautioned that Accenture management’s commentary about clients diving head-first into GenAI-led programmes contrasts with the more cautious stance of Indian vendors, who continue to focus on cost-takeout–driven deals.

Unfazed GenAI revenue surge  

While large Indian IT companies have so far refrained from separately reporting revenue generated from generative AI—merely alluding to its growing presence in deal compositions—Accenture has emerged as an outlier. At the end of fiscal 2024, Accenture reported $3 billion in new GenAI bookings and $900 million in revenue, compared to $300 million in bookings and $100 million in revenue in FY23.

Over the past seven quarters, the company has seen a threefold increase in new GenAI deals, rising from $500 million to $1.5 billion.

In addition to improved pricing, Accenture Chair and CEO Julie Sweet elaborated on the company's deep AI integration, stating: “We do very sophisticated, difficult integration, and so we actually look at how you use GenAI across the entire life cycle. And we are increasing and embracing as quickly as possible our use of it in delivery in order to be really at the cutting edge, and we have built that into our guidance.”

During the first nine months (three quarters) of FY24, the company secured a cumulative $2 billion in new GenAI bookings. In the current fiscal year, it has already doubled that figure to $4.1 billion for the corresponding period.

While sequential growth in GenAI bookings appears to have moderated, Sweet remarked, “The GenAI demand continues to be very, very strong, and now it's getting big enough that it's going to fluctuate a little bit.”