Accenture reported strong revenue growth of 27% in c/c in Q3FY22, beating the upper end of guidance. Growth was strong all round. Order book growth was good but lower than revenue growth at 15% in c/c. FY2022 revenue growth guidance was raised to 25.5-26.5%. Headcount addition was modest. Management indicated no change in decision-making and expects strong bookings and revenue growth in Q4FY22. Results were strong, though the focus of the Street has shifted to impact on business in a recessionary environment.
Strong broad-based revenue growth; moderate bookings growth
Revenue guidance increased again; EPS guidance cut due to Russia effect
Accenture increased revenue growth guidance once again to 25.5-26.5% from 24-26% earlier, which was impressive. The guidance increase is large enough noting that just one quarter remains for completion of FY2022. EPS guidance was cut to $10.61-10.7 from $10.61-10.81, due to additional cross-currency headwinds and loss on disposition of Russia operations ($96.2 mn hit). Revenue growth guidance for Q4FY22 at 20-24% is remarkably strong. Management has also guided for strong order bookings.
Moderate growth in bookings
Bookings grew 10% to $17 bn (15% in c/c). In reported terms, consulting bookings grew 13.5%, while outsourcing was a lot more sedate at 6.1%. Book to bill ratio on LTM basis was 1.1 in consulting and 1.2 in outsourcing. We note that 15% c/c/ bookings growth, off a high base of 40% growth in the previous year, is a reasonably good outcome. In any case, the company has guided for solid bookings growth in Q4FY22.
No change in decision-making cycle
Demand is strong with no change in the decision-making cycle. The nature of conversations has changed depending on the industry served. For example, cost focus has increased in consumer goods industries.
Read-through from the results
The immediate impact of a deteriorating environment is not visible from the results or decision-making of clients. In fact, Accenture increased revenue growth guidance, reported stronger growth in Europe and delivered better growth in bookings in consulting (considered to be more vulnerable). In a way, the results and outlook are as good as it gets, especially in the context of lowered expectations, visible in 12% correction in stock price in the past three months (46% correction from the peak).
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