WHAT ACCENTURE’S QUARTERLY EARNINGS TELLS US ABOUT ENTERPRISE IT SPEND: “ALL STRATEGIES LEAD TO TECHNOLOGY”
Accenture, the world’s largest IT consulting firm, recently reported it’s fourth quarter earnings and full fiscal year end on September 22nd. While there’s no shortage of bad news and sentient on the economy, Accenture is demonstrating resilience and an encouraging 2023 outlook (besides headwinds caused by the strong dollar) that can serve as a bellwether general enterprise IT spend, which includes a massive eco-system SaaS and IT services vendors, large and small.
Summary
– 4th quarter revenue of $15.4 billion which increased 15% in USD and 22.4% in local currency
– 14.7% operating margin which expanded slightly
– 32% gross margins (lower than I would have expected considered premium price points and that middle market IT services firms are ~40+%)
– $61.6 billion revenue for fiscal full year 2022, a record increase of 22% in USD and 26% in local currency
– 15.2% operating margin which expanded slightly
– A record $8.8 billion of Free cash for the year and $3.6 billion for 4th quarter
– $18.4 billion of new bookings for the fourth quarter and a record $71.7 billion for full year, a 21% increase in USD and 25% increase in local currency over full-year fiscal 2021
– For fiscal year 2023, Accenture expects revenue growth of 8% to 11% in local currency (sandbagging considering economic and currency headwinds?)
Other Quantitative Nuggets
– 721k employees!!
– 91% utilization (efficient!)
– 19% voluntary employee attrition (not surprising when you have 700k+ employees)
– $3.4b spent on 38 acquisitions avg. $89mm an acquisition (wow!)
– 47% of employees are women (impressive!)
Themes
– “While industries and markets are being affected differently, there are two common themes: all strategies lead to technology, particularly cloud, data, AI and security, which are fundamental to its strong digital core. Our cloud business is now $26 billion and grew 48%, with Cloud First being the biggest driver of the growth.”
– “Companies are also seeking to execute compressed transformations, the second theme. These mean bold programs on accelerated time frames often spanning multiple parts of the enterprise at the same time. Managed services have become increasingly strategic as companies seek to move faster and leverage our digital platform and talent, and they are turning to Accenture because of our excellence across the enterprise. We are unmatched in terms of breadth and depth of capabilities and industry coverage.”
Opportunities
1. “Total enterprise reinvention. We are helping our clients transform every part of their business with technology from building a digital core to optimizing operations to achieve agility, efficiency and resilience to accelerating their growth agendas.” (this seems broad and intangible. Likely to face headwinds in tight market)
2. “Systematic transformation: 68% of CFOs say they today have either three or more transformation programs either going right now or about to start in parallel.” (I wonder what this % was in prior survey periods? Tough to gauge if that’s strong or weak)
3. “Total Enterprise Reinvention. We are helping our clients transform every part of their business with technology from building a digital core to optimizing operations to achieve agility, efficiency and resilience to accelerating their growth agendas.”
“Unilever, one of the world’s largest consumer goods companies is an example of a company that is leading in total enterprise reinvention. Together, we are setting a new industry standard by reinventing technology delivery with cutting-edge automation, delivering cloud migration at scale, the largest ERP migration to the cloud and the industry and shifting to technology solutions that support their growth strategy.”
4. “And as our clients build their digital core, security continues to be more important than ever. With over $6 billion in revenue and 45% growth, our integrated security capabilities from identity to threat intelligence to manage security services to incident response are critical as our clients respond to increasing risk as the security landscape widens.”
In conclusion, a surprisingly upbeat report and decent forecast, despite the strong dollar, that is a bright spot of recent public company earnings reports which have mostly been downers, and self-fulfilling prophecies of the doom and gloom ahead of us. As analysts have said “digital transformation projects largely remain non-discretionary thus cushioning companies such as Accenture from a much severe impact from any spending cut by businesses.”
https://www.accenture.com/us-en/services/technology/ecosystem