ACNNYSEThe short version
Accenture plc
Accenture is the world's largest technology-services firm, turning about $70 billion of consulting and managed-services revenue and 779,000 people into roughly $11 billion of annual free cash flow, now growing in the low single digits.
From a peak near $201 in early April 2026, the shares fell to about $124 by late June — a record ~18% single-day drop followed the June guidance cut — before recovering to $142 by early July.
$142
Share price
~$90B
Market cap
$69.7B
FY2025 revenue
$10.9B
Free cash flow
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The statements
A $70 billion cash machine growing in the low single digits
FY2022 → FY2025as reported · $
Revenue$69.7B+7%
Gross margin31.9%−0.7pp
Operating margin15.6%+0.1pp
Net income$7.7B+6%
EPS$12.15+6%
Free cash flow$10.9B+26%
Fiscal years ending 31 August; FY2022–FY2025 as reported.
- Revenue $69.7B, up 7%. Growth recovered from a 2% trough in fiscal 2024 to 7% in local currency in fiscal 2025, then guides back down to 3–4% for fiscal 2026.
- Margins grind higher, cash jumped. Adjusted operating margin rose 10 basis points to 15.6%, and operating cash flow reached $11.5B on capital spending under 1% of revenue — leaving $10.9B of free cash flow.
- Diluted EPS $12.15. Net income was $7.7B on a roughly 25% return on equity, with the balance sheet holding net cash even after a first-ever $5B bond issue.
Where growth comes from
Reported growth is about half bought; the organic core is thin
~4%
Organic ex-federal growth, FY2025Flat in FY2024
+72%
Goodwill, now $22.5B~34% of total assets
~$9B
Guided FY2026 deal spendLargest in company history
About half of even the strong 7% fiscal-2025 growth was inorganic.
- Once the ~3-point inorganic contribution and the ~1-point federal drag are stripped out, Accenture's organic ex-federal revenue runs only low-single-digits — flat in fiscal 2024 and roughly 4% in fiscal 2025 — while goodwill has climbed 72% to $22.5 billion and guided fiscal-2026 deal spend has risen to a record ~$9 billion to keep feeding it.
- But the core has not been eroding. Federal is only ~8% of revenue and is guided back to growth by August 2026; the capital-projects practice built through M&A is now $1.2B and grew 49% in fiscal 2025 largely organically, with no goodwill impairment.
Margin structure
AI is all top line; the margin it should move is slipping
Gross margin vs adjusted operating margin
Gross margin fell 70bps in FY2025 while the adjusted operating line rose 10bps on overhead leverage.
- Advanced-AI revenue tripled to $2.7 billion at accretive pricing yet excludes AI used in delivery, and in fiscal 2025 gross margin fell 70 basis points to 31.9% on higher payroll while adjusted operating margin still rose 10 basis points to 15.6% purely on sales-and-admin scale leverage — so the productivity half of the AI story is nowhere in the margin the labor-and-AI economics would move.
- One soft year, not yet a trend. Seventy basis points on $69.7B is about $490M of gross profit, but gross margin also dipped to 32.0% in fiscal 2022 with no AI involved and recovered to 32.6% by fiscal 2024.
- The offset is finite. The ~90bps of sales-and-admin leverage that covered the decline runs out once overhead is compressed; a second year of gross-margin erosion would flow straight to operating income.
The moat
Two to three times any rival, entrenched, but no cost edge
Revenue scale vs named peers
Most recent fiscal year, approximate; IBM Consulting excluded.
- Breadth and tenure are the moat. Accenture has partnered with 195 of its top 200 clients for a decade or more and is the No. 1 partner to each of its top 10 technology allies; nearly 80% of large deals are now multi-service.
- The edge is not per-dollar profit. Its 11.0% net margin trails the offshore Indian majors, whose low-cost delivery earns more on every revenue dollar; Accenture trades margin rate for scale and proximity.
- Its partners are also its threat. The 60% of revenue tied to ecosystem partners comes from the same firms its filings name as potential disintermediators as AI-native tools automate the integration layer.
AI and labor
So far AI adds work faster than it removes billable hours
$2.7B
Advanced-AI revenue, FY2025Tripled year on year
$5.9B
Gen-AI bookingsNearly doubled
$89.4k
Revenue per employeeUp from $83.8k in FY2024
Headcount was essentially flat in fiscal 2025 while revenue grew 7%.
- New demand, priced up. Advanced-AI revenue tripled at pricing management calls accretive, and the figure excludes AI used inside delivery — so the productivity effect can only surface as margin, not revenue.
- Reshaping, not shrinking. Accenture took an $865M charge to exit stranded skills while guiding total headcount to grow again in fiscal 2026 and retraining over 550,000 people in AI fundamentals.
- The deflation is real too. Utilization sits near its 92% ceiling and gross margin fell on higher payroll, so delivery-side AI is still a promise in the cost base rather than a realized gain.
Revenue mix
The recurring half is now the larger, faster-growing half
Revenue by type of work
By Q3 FY2026 Managed Services had overtaken Consulting outright.
- A near-even split, tilting to recurring. Consulting ($35.1B) and Managed Services ($34.6B) are almost the same size; the annuity-like managed half grew 5% in fiscal 2024 while project work fell 1%.
- The weak spot keeps moving. The slowdown to low-single-digit growth happened without any industry group collapsing — the drag rotated from technology and financial services into federal-heavy public service.
- The federal pocket has a clock. Federal is ~8% of revenue; management expects to lap the drag and return it to growth in the quarter ending August 2026 — a forecast, not yet a result.
Cash and compounding
The cash is real, but it compounds slowly per share
Cash returned to shareholders, FY2025
Buybacks$4.6B55%
Dividends$3.7B45%
$8.3B returned; buybacks mostly offset shares issued to employees.
- $10.9B of free cash flow, cheaply made. Capital spending is under 1% of revenue, so nearly all operating cash flow drops through — though ~$2.1B of stock compensation trims the economic figure closer to $8.8B.
- Buybacks tread water. Close to three-fifths of shares repurchased simply replace stock handed to employees; the diluted count has fallen only about 1.6% in three years.
- Net cash, with a new wrinkle. Goodwill has risen 72% to $22.5B and the company issued its first-ever $5B of senior notes — dry powder for a record deal year while staying net cash.
Management's record
Reliable on cost and cash, shakier on forecasting demand
Local-currency revenue guidance vs outcome
| Fiscal year | Opening guide | Where it landed |
|---|---|---|
| FY2024 | 2–5% LC | Cut twice → 2% |
| FY2025 | 3–6% LC | Raised → 7% |
| FY2026 | 2–5% LC | Cut → 3–4% |
Adjusted operating margin, by contrast, has hit its 10–30bps expansion target every year.
- Metronomic where it has control. Adjusted operating margin has expanded 10–30 basis points every year as guided, and cash returned to shareholders has risen each year to $8.3B.
- The whipsaw is its own. It added 24,000 people into a 2% growth year, then paid $865M to cut — and swung deal spend from $6.6B to $1.5B to a guided ~$9B in three years.
- An adjusted-number question. 'Business optimization' charges have recurred three years running yet are stripped from the profit its incentive pay is measured against; pay has, at least, fallen with the stock.
What the stock did
Five years of going nowhere while the market compounded
$100 invested August 2020, total return
A third index, the S&P 500 IT sector, reached $251 over the same span.
- $100 became $117; the market made $199. Accenture's total return lagged for five straight years, then fell roughly 50% in calendar 2026 — including a record ~18% single-day drop on the June guidance cut.
- From secular grower to mature services firm. The multiple has compressed from about 37x at its 2021 peak, and a ~26x decade average, to near 11x — its lowest as a public company.
Relative valuation
The scale leader now trades below its offshore rivals
Trailing price/earnings vs named peers
An inversion: Accenture historically traded at a premium to all of these names.
- An inversion that is new. TCS (15.3x) and Infosys (14.7x) — structurally more profitable per dollar — now carry higher multiples than the franchise leader, which sits with the stalled Western pure-plays.
- Either a mispricing or a judgment. The gap is either the market underpricing the leader or its verdict that scale no longer earns a premium in an AI-disrupted services market.
Reverse valuation
At 10x forward earnings, the price pays for roughly zero growth
Perpetual growth the multiple embeds
| Perpetual growth | Fair P/E | Implied value |
|---|---|---|
| 0% | 11.1x | $154 |
| 2% | 14.3x | $198 |
| 3% | 16.7x | $231 |
| 4% | 20.0x | $277 |
A simplified reverse-DCF at a 9% cost of equity; the decade-average 26x embedded about 5% growth.
- The price implies decline, not a floor. Backed out through a simple discount model, roughly 10x forward earnings embeds close to zero perpetual growth — a yield most investors associate with no-growth cyclicals.
- Yet the company still guides to growth. Management targets 7–8% adjusted-EPS growth for fiscal 2026, a ~4.2% dividend, and net cash, so the ~26% gap to the $179 consensus target reads as honest disagreement about which growth regime this is.
Scenarios
Priced near the bear case, with the odds tilted up
Implied fiscal-2029 price by path
Bear (~0% organic)
$130
Consensus target
$179
Base (~3% organic)
$203
Bull (AI re-accelerates)
$303
Three-year total returns with dividends: bear ~+4%, base ~+56%, bull ~+127%.
- Because Accenture already trades near the multiple a decliner would command, the base path earns a double-digit return on 7-8% guided EPS growth and the dividend without any re-rating, and the bear case needs organic growth to turn negative rather than merely slow.
- The bear path is where it has traded. Third-quarter bookings fell 3% in local currency, guidance has been cut twice this cycle, gross margin drifted to 31.9%, and the five-year total return of $117 against the S&P 500's $199 shows the pessimistic path is not hypothetical.
What to watch
A quality, cash-generative business priced for decline; the next quarters of bookings and margin decide it.
- 01New bookings and book-to-bill: staying below 1.0 in local currency would confirm the base is eroding; above 1.1 with firming organic growth points the other way.
- 02Gross margin: a recovery toward 32.6% signals AI reaching delivery cost; a slide below 31% signals the labor model deflating.
- 03Organic ex-federal growth: holding 4–5% supports the maturing-compounder read; turning negative once M&A is stripped confirms the bear.
- 04The 'business optimization' charge: going to zero means the reshaping is complete; a fourth year running means it is structural.
This distills a guided study built chapter by chapter — the moat, the growth engine, the cash, the margin, and what 11 times earnings implies.
Compiled from the full report · 2026-07-17 · For information, not investment advice.