Accenture plc - Class A (ACN) — Q2 2025 Earnings Call Transcript

Thank you, operator, and thanks, everyone for joining us today on our second quarter fiscal 2025 earnings announcement. As the operator just mentioned, I'm Katie O'Conor, Managing Director, Head of Investor Relations. On today's call, you will hear from Julie Sweet, our Chair and Chief Executive Officer, and Angie Park, our Chief Financial Officer. We hope you've had an opportunity to review the news release we issued a short time ago. Let me quickly outline the agenda for today's call. Julie will begin with an overview of our results. Angie will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the second quarter. Julie will then provide a brief update on our market positioning before Angie provides our business outlook for the third quarter and full fiscal year 2025. We will then take your questions before Julie provides a wrap-up at the end of the call. Some of the matters we'll discuss on this call, including our business outlook, are forward-looking and as such are subject to known and unknown risks and uncertainties, including but not limited to those factors set forth in today's news release and discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in this call. During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of non-GAAP financial measures where appropriate to GAAP in our news release or in the Investor Relations section of our website at accenture.com. As always, Accenture assumes no obligation to update the information presented on this conference call. Now let me turn the call over to Julie.

Thank you, Katie, and everyone joining this morning, and thank you to our more than 800,000 people around the world for their extraordinary work and commitment to our clients, which resulted in a very strong quarter, creating 360-degree value for all our stakeholders. Starting with our quarter, we are very pleased with our results as we continue to deliver on our strategy to return to strong growth in FY '25. I will share some highlights from the quarter and then turn to an update on new developments since we were together in December in our federal business and the current environment more broadly. Our clients continue to prioritize large scale transformations, and we are their reinvention partner of choice, as reflected in our bookings of $20.9 billion, including 32 clients with quarterly bookings greater than $100 million. We grew 8.5% in local currency with revenue of $16.7 billion at the top end of our guided range, and we continue to take market share on a rolling four-quarter basis against our basket of our closest global publicly traded competitors, which is how we calculate market share. We had another milestone quarter in Gen AI with $1.4 billion in new bookings and approximately $600 million in revenue. Operating margin contracted 20 basis points compared to adjusted operating margin last year, and we delivered EPS growth of 2% over Q2 FY '24 adjusted EPS. We continue to invest significantly in our business to drive additional growth in highly strategic areas, with over $250 million deployed primarily across six strategic acquisitions, and we invested in our people with approximately 15 million training hours this quarter, designed to help us bring the latest in solutions and technology to our clients, provide our people with marketable skills, and reinvent our services using Gen AI. We increased our data and AI workforce to approximately 72,000, continuing progress against our goal of 80,000 by the end of FY 2026. We continue to invest in creating and maintaining thriving communities, which is a component of our long-term growth strategy. This quarter, in India, we launched a transformative hospitality skilling program in collaboration with our client, Marriott International, which prepares disadvantaged youth for entry-level jobs in the hospitality sector, including training for digital skills. Because we help our clients execute on some of their most important priorities, and we need to attract and retain the best people, recognition of Accenture as an ethical and admired company is critical for our clients' confidence and to attract this great talent. We are pleased that we have been recognized by Ethisphere, as one of the World's Most Ethical Companies for the 18th year in a row and for the third consecutive year, we ranked number one in our industry and among the top five overall on JUST Capital America's Most Just Companies. In addition, thanks to our clients, partners, and the wider business community, we earned the number one position in our industry for the 12th year in a row and number 30 overall, our highest rating on Fortune's list of the World's Most Admired Companies. Now for two updates. First, Accenture Federal Services. Federal represented approximately 8% of our global revenue and 16% of our Americas revenue in FY '24. As you know, the new administration has a clear goal to run the Federal government more efficiently. During this process, many new procurement actions have slowed, which is negatively impacting our sales and revenue. In addition, recently, the General Services Administration has instructed all federal agencies to review their contracts with the top 10 highest paid consulting firms contracting with the U.S. government, which includes Accenture Federal Services. The GSA's guidance would terminate contracts that are not deemed mission-critical by the relevant federal agencies. While we continue to believe our work for federal clients is mission-critical, we anticipate ongoing uncertainty as the government's priorities evolve and these assessments unfold. Based on our significant experience across federal and commercial clients, we see major opportunities over time for us to help consolidate, modernize, and reinvent the federal government to drive a whole new level of efficiency. Second, in recent weeks, we are seeing an elevated level of what was already significant uncertainty in the global economic and geopolitical environment, marking a shift from our first quarter FY '25 earnings report in December. At the same time, we believe the fundamentals of our industry remain strong and we are very well positioned with our clients because all strategies continue to lead to reinvention through new ways of working, tech, data, and AI. We are confident in executing our strategy to help clients reinvest. As you would expect, we are laser-focused on bringing tremendous value to our clients. Our strengths lie in our agility as the market we operate in changes, utilizing our deep client and ecosystem relationships and our leading position in Gen AI and technology more broadly. We are also well diversified across markets, industries, and types of work, which enables us to continue to lead in a changing market context as we have done before. Over to you, Angie.

Thank you, Julie, and thanks to all of you for taking the time to join us on today's call. We were very pleased with our results in the second quarter, particularly our continued strong top line growth, which was once again broad-based across geographic markets, industry groups, and consulting and managed services. Let me begin by summarizing a few highlights from the quarter. Revenues grew 8.5% in local currency, which was at the top end of our guided range, with nine of our 13 industries growing high-single digits or higher, and we continue to take market share. We delivered EPS in the quarter of $2.82, reflecting 2% growth over adjusted EPS last year. Operating margin of 13.5% for the quarter decreased 20 basis points compared to adjusted Q2 results last year and includes significant investments in our people and our business. Finally, we delivered free cash flow of $2.7 billion and returned $2.4 billion to shareholders through repurchases and dividends. In the first half of the year, we have invested almost $500 million, primarily attributed to 11 acquisitions. With those high-level comments, let me turn to some of the details, starting with new bookings. New bookings were $20.9 billion for the quarter, a 3% decrease in U.S. dollars and flat in local currency with an overall book-to-bill of 1.3. Consulting bookings were $10.5 billion with a book-to-bill of 1.3. Managed Services bookings were $10.4 billion with a book-to-bill of 1.2. Turning now to revenues. Revenues for the quarter were $16.7 billion, a 5% increase in U.S. dollars and 8.5% in local currency. The foreign exchange impact for the quarter was approximately negative 3% compared with a negative 2.5% estimate provided last quarter. Consulting revenues for the quarter were $8.3 billion, up 3% in U.S. dollars and 6% in local currency. Managed Services revenue was $8.4 billion, up 8% in U.S. dollars and 11% in local currency, driven by double-digit growth in technology-managed services, which includes application-managed services and infrastructure-managed services, and high-single digit growth in operations. Turning to our geographic markets. In the Americas, revenues grew 11% in local currency. Growth was led by banking and capital markets, industrial, health, and consumer goods, retail, and travel services. Revenue growth was driven by the United States. In EMEA, we delivered 8% growth in local currency, led by growth in public service, life sciences, consumer goods, retail, and travel services. Revenue growth was driven by the United Kingdom. In Asia-Pacific, revenue grew 1% in local currency, driven by growth in insurance and utilities, partially offset by a decline in chemicals and natural resources. Revenue growth was led by Japan, partially offset by a decline in Singapore. Moving down the income statement. Gross margin for the quarter was 29.9% compared to 30.9% for the second quarter last year. Sales and marketing expense for the quarter was 10.1% compared with 10.3% for the second quarter last year. General and administrative expense was 6.3% compared to 6.9% for the same quarter last year. Before I continue, I want to note that in Q2 of last year, we recorded $115 million in costs associated with our business optimization actions, which decreased operating margin by 70 basis points in EPS by $0.14. The following comparisons exclude these impacts and reflect adjusted results. Operating income was $2.2 billion in the second quarter, reflecting a 13.5% operating margin, a 20 basis point decrease from adjusted operating margin in Q2 of last year. Our effective tax rate for the quarter was 20.4% compared with an adjusted effective tax rate of 18.8% for the second quarter last year. Diluted earnings per share were $2.82 compared with adjusted diluted EPS of $2.77 in the second quarter last year, reflecting 2% growth. Days services outstanding were 48 days compared to 50 days last quarter and 43 days in the second quarter of last year. Free cash flow for the quarter was $2.7 billion, resulting from cash generated by operating activities of $2.9 billion net of property and equipment additions of $171 million. Our cash balance at February 28 was $8.5 billion compared with $5 billion at the end of August 31. With regard to our ongoing objective to return cash to shareholders, in the second quarter, we repurchased or redeemed 4 million shares for $1.4 billion at an average price of $361.16 per share. As of February 28, we had approximately $5 billion of share repurchase authority remaining. Also in February, we paid a quarterly cash dividend of $1.48 per share for a total of $929 million. This represented a 15% increase over last year. Our Board of Directors declared a quarterly cash dividend of $1.48 per share to be paid on May 15, a 15% increase over last year. And now let me turn it back to Julie.

Thank you, Angie. Starting with the demand environment, our clients continue to be focused on reinvention, and Gen AI is a catalyst for reinvention. They are focused on building the digital core with more AI being built-in, which is driving our growth, and on areas such as customer core operations, including supply chain and Industry X. For our clients, the twin themes of achieving both cost efficiency and growth continue. The number of clients embracing Gen AI is increasing significantly, and we are starting to see some tangible examples of scale in data and AI. We are partnering with Telstra, Australia's leading telecommunications company, to create a new joint venture to accelerate its data and AI roadmap and fast-track the business into a new era of AI-driven reinvention. Through the joint venture, we will work together to simplify and modernize their data systems and set up a comprehensive AI foundation to deploy advanced AI solutions across their organization. Value-driving AI use cases have been identified across the business that are suitable for scaling and will enhance network resilience, deliver seamless connectivity, and better customer experience. Using our AI Refinery platform, we will reimagine business processes by implementing Agentic AI. Specialized AI tools will support their employees to work smarter and faster, and teams will operate more efficiently and effectively. In addition, we will help evolve Telstra's Data and AI Academy, a company-wide upskilling initiative leveraging our learning and development programs, helping to build data and AI fluency and feature critical skills across its workforce. Building on Telstra's globally leading responsible AI practices, the JV is designed to sustain and improve on this by identifying and mitigating AI risks while building trust and adoption as it scales AI across the organization. This partnership with Telstra illustrates to clients that there are creative ways to accelerate their own use of data and AI. Clients in Australia from banking, retail, and utilities are working with us to design their own innovative ways to jumpstart their reinvention with data and AI. We continue to see our clients building their digital core as a foundation for reinvention and increasingly asking us to incorporate emerging technologies like AI, as well as data into this work. Cloud saw double-digit growth this quarter, and security had very strong double-digit growth. We are working together with a multinational food processing company to help reinvent themselves as a data-driven organization, revolutionizing their enterprise. This includes the end-to-end supply chain and frontline sales function to support rapid growth. Our unique partnership model uses our library of AI and Gen AI assets to quickly deliver productivity, with the potential of generating over $0.5 billion in value to self-fund their reinvention. The savings are reinvested into an ongoing build-out of a robust digital core, which becomes the foundation to support and enable any new technologies, processes, or systems the company may adopt in the future. For example, the company is using Gen AI to forecast inventory risks and generate next-best action recommendations, saving them millions of dollars annually. If excess inventory on a product is selling slower than expected in a region, Gen AI tools proactively prompt promotional sales or halt production before the inventory results in a margin loss. In another instance, an AI-based communication platform was deployed that eliminates up to five different language barriers between supervisors and frontline workers, reducing costly errors from miscommunications and delays. With many households having at least one of their products, this company's commitment to ongoing transformation will position them to continue to build, design, and run a future-ready enterprise, rethink work, and drive innovation. We are helping one of the world's largest auto manufacturers modernize their security operations to protect the company's critical IT systems and stay ahead of the rapidly evolving security landscape. We will implement a modern threat detection and response platform that will enable the company to integrate its data across the enterprise, identifying cyber threats and responding to incidents faster. We are building a new Gen AI security engine on Accenture's My Security platform, which will help automate cloud migration tasks, moving the threat detection capability from the legacy platform to the new one without interruption. This is expected to increase the company's operational excellence, enhance cyber resiliency, increase risk visibility, and drive a significant improvement in efficiency. With the new platform, the company will be able to better safeguard digital assets, including information critical to automotive design and manufacturing. This collaboration will help better protect the company, its partners, and customers, setting the stage for advanced AI, smart manufacturing, and increased innovation. To capture the value of technologies like Generative AI, companies need a digital core and now to stay ahead and truly scale AI, companies also need what we call a cognitive digital brain, an always-on and always-learning system. As we shared in our Tech Vision 2025, our industry expertise is critical to building the digital core and digital brain. A deep knowledge of the processes today and how they can be reinvented for tomorrow is key. Our proven track record of digital transformation and our ability to bring experience in strategy, consulting, industry, process, technology services, and decades of experience in managed services for our clients allows us to truly reinvent using AI, including digital agents to create transformational value at scale. We are deepening our partnership with Repsol, a leading multi-energy company and a client for more than a decade to advance its digital program and scale Agentic AI, reinventing key business operations to drive sustainable growth. Over the past three years, we have built a secure, cloud-based digital core with a unified data foundation. Now we will use our AI Refinery platform to deploy customized AI agents across functions such as planning, forecasting, and customer service, making processes more dynamic and less complex. Employees will be able to work more efficiently and provide customers with accurate personalized products and services. For example, AI agents can analyze available data to offer timely and relevant bundled energy solutions, enhancing Repsol's position as an integrated provider. We will upscale employees in AI and digital technologies through an expanded training program to support adoption. We are also exploring digital twins and robotic solutions to enhance planned maintenance and other tasks in industrial and logistics centers. Repsol is positioning itself as an early adopter of AI in the energy sector, increasing efficiency, boosting productivity, and promoting new ways of working to better serve customers. The transformation and digitization of manufacturing is an important area of growth and Industry X grew high-single digits this quarter. We are working with KION, a global leader in supply chain solutions, to use AI-powered digital twins to create smarter, safer, and more adaptable warehouses that can evolve with the world around them and handle nearly any supply chain challenge, marking the next digital frontier. Picture a busy warehouse during peak shopping season, workers navigating narrow aisles and conveyor belts, forklifts loading and unloading freight. Now imagine robots working seamlessly with human teams to fulfill orders faster and more safely. We are making this a reality by creating digital versions of physical assets such as conveyors and forklifts and integrating autonomous robots with human workers on an AI-driven platform that accurately simulates millions of complex factory processes to help ensure safety and avoid disruptions before robots hit the factory floor. We are also predicting and adapting to real-world challenges as they happen, including how events like Black Friday sales or a product going viral might affect warehouse operations, adjusting robot capabilities in real-time. With these advancements, warehouse workers' responsibilities will evolve as they work alongside AI systems, making them more desirable candidates for higher-skilled roles. Song grew double digits this quarter as more clients seek to reinvent customer experience. We have the unique ability to integrate creative data and AI, tech, and strategy while leveraging our industry and operations expertise to unlock marketing and sales as a growth enabler for our clients while delivering efficiencies. We are partnering with a multinational conglomerate in the communications industry to streamline and optimize their media strategy and operations for their mobile division. We've implemented a new digital platform with a unified data foundation, which will provide transparency and real-time access to accelerate campaign positioning. The company will also reduce the number of media agencies to a single partner, Accenture Song, to maximize media spend outcomes. Accenture's marketing operations Managed Services will leverage automation and AI to increase efficiencies in manual routine tasks, allowing employees to focus on more strategic work. These changes will also allow the company to shift from focusing solely on media-related data to incorporating broader insights to make more strategic and informed decisions that benefit the entire company, such as predicting customer content preferences, which can drive more efficient media placement and sales. Talent continues to be at the top of the agenda for CEOs and governments, and reinvention requires working in new ways and developing new skills. LearnVantage positions us to help to be able to help clients develop talent and skills to drive future growth. Our clients are using LearnVantage to strengthen learning development, turbocharging the learner's experience. For example, we are bridging the skills gap and creating certification pathways for learners, using LearnVantage in the Kingdom of Saudi Arabia. This will fast-track their careers and support their adoption of Gen AI. A big-box retailer has accelerated learning opportunities for entry-level to highly technical skill sets, deepened understanding of current industry skills by role needs, and empowered employees with guided learning based on the skills they need for their role. Finally, a look at how we continue to execute on our goal to strategically deploy $2 billion to $3 billion in B&A this fiscal year. We are investing in our Industry X and supply chain capabilities with our acquisitions this quarter of AOX and Staufen AG in Germany. We also acquired IQT Group in Italy, a managed services provider, which will help utility providers build and modernize integrated electricity and water networks. To continue to lead in Gen AI, we acquired Halfspace in Denmark to help our clients in the Nordics region leverage and scale AI to make better, more informed decisions faster, and to enable us to scale faster in financial services, we acquired Altus Consulting in the UK, a leader in consulting and digital transformation. Also this quarter, we purchased a digital twin technology platform for banks from Percipient, a Singapore-based fintech company with deep expertise in banking technology transformation. Back to you, Angie.

Thanks, Julie. Before I get into the details of our outlook, as Julie mentioned, we have seen an elevated level of uncertainty, including in our federal business. Because this change is very recent, our revenue guidance range for both Q3 and the full year reflects our best view based upon what we see today, which may evolve differently from our estimates and assumptions. With that said, let me turn now to the business outlook. For the third quarter of fiscal '25, we expect revenues to be in the range of $16.9 billion to $17.5 billion. This assumes the impact of foreign exchange will be about negative 0.5% compared to the third quarter of fiscal '24, reflecting an estimated 3% to 7% growth in local currency. For the full fiscal year '25, based upon how the rates have been trending over the last few weeks, we continue to assume the impact of FX on our results in U.S. dollars will be approximately negative 0.5% compared to fiscal '24. For full fiscal '25, we now expect our revenue to be in the range of 5% to 7% growth in local currency over fiscal '24. We continue to expect an inorganic contribution of a bit more than 3% in terms of acquisitions, with about 4% in the first half and about 2% in the second half. And we now expect to invest about $2 billion to $3 billion in acquisitions this fiscal year. For operating margin, we now expect fiscal year '25 to be 15.6% to 15.7%, a 10 basis point to 20 basis point expansion over adjusted fiscal '24 results. We continue to expect our annual effective tax rate to be in the range of 22.5% to 24.5%. This compares to an adjusted effective tax rate of 23.6% in fiscal '24. We now expect our full year diluted earnings per share for fiscal '25 to be in the range of $12.55 to $12.79 or 5% to 7% growth over adjusted fiscal '24 results. For the full fiscal '25, we continue to expect operating cash flow in the range of $9.4 billion to $10.1 billion, property and equipment additions to be approximately $600 million, and free cash flow to be in the range of $8.8 billion to $9.5 billion. Our free cash flow guidance continues to reflect a free cash flow to net income ratio of 1.1 to 1.2. Finally, we continue to expect to return at least $8.3 billion through dividends and share repurchases as we remain committed to returning a substantial portion of our cash to shareholders. As we move into the second half of the year, we remain laser-focused on managing our business with rigor and discipline. With that, let's open it up, so we can take your questions.

Thanks, Angie. I would ask that you each keep to one question and a follow-up to allow as many participants as possible to ask a question. Operator, would you provide instructions for those on the call?

Good morning, guys. Thanks for all of this. So I just wanted to start outside of U.S. Federal, so the other 92% of the business. Can you just clarify to what extent you are or not seeing clients hit the pause button at all on new initiatives, any change in pace of converting pipeline to backlog or backlog into revenue? You can certainly appreciate that your tone is a little bit more cautious, maybe the visibility isn't quite as high, but are you seeing tangible signs of any pause in client activity at this point in time?

Hi, Jason. Good morning. Thanks for your question. Overall, we have not seen any changes.

Yeah. And as you can imagine, some of these changes are relatively recent, and so we're in a lot of discussions. In some cases, those discussions are about accelerating, particularly in the cost discussions, right, like, can we go a little faster to get to our programs for places where we're contracting. And we are at the heart of many of the discussions where businesses are trying to process what this might mean. So, but we're not seeing any pauses now.

Okay. So we got to watch and wait on that. So let's go to U.S. Federal just for a minute. Can you just clarify for us what the growth rate was in U.S. Federal revenue in the quarter and what you're assuming for the second half of the year in U.S. Federal?

I will provide some context regarding our Q3 and full year guidance. As for Q2 specifically for Federal, we typically do not provide that information during the year; it is usually shared at the year's end. Overall, we were pleased with our performance in the second quarter and the first half of the year. In Q2, we achieved revenue at the upper end of our expectations and are happy to revise our guidance to a growth range of 5% to 7% by removing the lower end. This adjustment reflects our satisfaction with how our business is positioned, particularly with the larger deals we strategically aimed to secure. For Q3 and the full year, our estimates take into account the potential impacts related to federal matters and the broader economic environment. In terms of growth contribution, we anticipate an inorganic boost slightly over 3%, with H2 projected at about 2%, which aligns with our previous quarter's expectations. Consequently, we now forecast organic growth for the year to be in the range of 2% to 4%. Specifically, consulting is expected to grow in the mid-single-digit range, while managed services are anticipated to achieve high-single-digit growth.

Okay. Understood.

Thank you.

Thank you very much. It's wonderful to connect with you, Julie and Angie. I'd like to inquire about the margin outlook and the changes associated with it. How much of that change is due to organic growth versus inorganic factors? Additionally, I'm often asked if the cost of doing business is rising. Is there an increase in execution costs or any adjustments in pricing? What additional information can you provide?

Thank you, Tien-Tsin. Regarding our inorganic capital deployment, we anticipate a range of $2 billion to $3 billion, but there will be no changes to our margin profile. In this quarter, we experienced a decline in gross margins, mainly due to increased subcontractor costs and the effects of our business optimization efforts, which had previously reduced severance costs in Q2 of last year. This margin fluctuation occurs quarterly, which is why we focus on managing our overall operating margin. For the year, we now project an expansion of 10 to 20 basis points, while we continue to make substantial investments in our business and workforce. We are observing the expected variability in our operating margin throughout the year. Our current focus is on pricing, which remained relatively stable this quarter, as well as on contract delivery and optimizing our operations, including supply and demand management and digitization for greater efficiency. We are confident in our full-year guidance of a 10 to 20 basis points increase, which also includes earnings per share growth of 5% to 7%.

Yes, Tien-Tsin, we usually provide updates around this time. We didn't experience the 30 basis points we anticipated. It's an extremely competitive market. While pricing has remained relatively stable, it's still a competitive environment.

Got it. No, that's all clear. Thanks for going through that. Just my follow-up, I think Jason asked about Federal already. Is there a way to frame the real revenue at risk? I know mission-critical is hard to define here on the call, but is there anything that you can share in terms of what's really at risk or not at risk when thinking about duration, or is it more about replenishing work? Just trying to get a better understanding of visibility there. Thank you.

Sure. And so, Tien-Tsin, what I would say is, and what we've been clear about is the guided range we're giving for the quarter and for the year reflects our best view of the impact that's coming from both the slowing of new procurement actions and the assessments of the work that we're doing, and so we don't get into different pieces of it, but those two things, the range of outcomes, and that's reflected in the range. I mean, it is 8% of our business. We have lots of other parts of our business that are about that size that we are always looking at estimates and assumptions. And so this is our best view of it today and the range reflects it.

Got it. Your view is better than mine and glad to see the bottom end of the range taken up here. Thank you.

Hey, guys. Thanks for taking the questions. I guess my first one is, Julie, just thinking about how budgets were set and how conversations may be changed from January, February to March, could you give us some color on that?

As we entered this calendar year, we did not observe a significant increase in budgets for our services across the board. It was more of the same in line with our previous discussions. As budgets were finalized, we noticed a consistent trend. It's still early to fully process recent events, and many factors could influence the situation. Clients often shift priorities, potentially accelerating cost-cutting efforts over other initiatives, but that dialogue is still in the early stages. However, we continue to see conversations pivot towards the need to act quickly and expand initiatives. The focus on cost management and growth persists, highlighting our unique ability to support clients in this area. For instance, a major food supplies manufacturer demonstrates that improved inventory and supply chain management can foster growth while also funding significant transformation efforts. Currently, the elevated uncertainty reflects our past observations—a greater inclination towards larger transformations. Regarding discretionary spending in Q2, it remained constrained overall, with some improvements noted in specific sectors like banking and capital markets in the Americas. Nevertheless, discretionary spending has generally remained similarly restricted, particularly in smaller deals. That’s the current situation we’re facing.

And I would just add, Julie, thanks for that. I would just add that as you think about our guidance for the full year as well, what it assumes is discretionary spend does not have to improve at the top end of the range while it continues to allow for further deterioration at the bottom.

Yeah, Angie. As my follow-up, I was going to ask, if you take the midpoint of that third quarter constant currency revenue, you get to about 5%. It implies a fourth-quarter revenue range looks a little wider than usual and maybe a couple of points lower than the third quarter. So just kind of what's built in? Are you building in a little bit of a slowdown in organic growth in that fourth quarter, or is that just some level of elevated uncertainty that goes into the fourth-quarter number? Thanks so much.

Bryan, your math is right. So we have seen an elevated level of uncertainty, and so we spoke about that. You're correct that if you think about our inorganic contribution of a bit more than 3% for the full year, it was roughly 4% in the first half. We're expecting about 2% in the second half, which means, really importantly, that our organic growth for the full year is now 2% to 4%.

Yeah. Hey, guys. Good job. And I guess my first question, health and public services typically is kind of flattish sequentially in Q2. It was down about 5% sequentially, and I guess kind of asking Jason's question too, is some of that U.S. Federal or are there other parts of health and public services that were weaker than normal? I'm just trying to understand that.

Hi, David. Good morning. Nothing to read into that. We didn't see any material impact within H&PS. It just ebbs and flows over the quarters, so nothing to really comment there.

Okay. And just as a follow-up, I think you might have mentioned pricing was pretty stable. I looked back the last seven quarters, you called pricing as being down a bit. I mean, are we starting to get back to a more stable environment for pricing?

So as you think about our pricing, we did comment that it was relatively stable. The market continues to be very competitive. And so what you can count on us to do is, we're always focused on it. And just as a reminder, pricing is the contract profitability or margin on the work that we sell.

Great. Thank you very much. As we talk about the little bit of a slowdown that you've seen in recent weeks, how would you characterize it geographically or by industry vertical? Just trying to get a little more color there. And what do you think those customers are looking for in terms of their proceed or continue to pause or hesitate type of decision-making?

Thanks, James. I want to clarify that we haven't noticed any slowdown in recent weeks. What we've pointed out, which I think everyone is aware of, is that there has been an increased level of significant uncertainty recently, with a couple of major themes. One is tariffs, which is a global issue, not limited to just the Americas, and the other is consumer sentiment, which is more regional. We're simply reflecting what we've all been observing, particularly in the last few weeks, and we are actively engaged in discussions with clients worldwide who are addressing these concerns. For instance, in Europe, there was a major announcement regarding increased spending in defense, an area where we have been investing and are well-positioned. I would like to commend my UK team; it's evident that the UK market is rebounding, and we are seeing revenue growth, exemplifying how we tackle challenges through our investment strategies. Our efforts there have included multiple acquisitions, and we are harnessing agility along with data and AI to drive the transformation happening in the UK. Additionally, we have a diverse range of business operations. In the Americas, with the current federal agenda focused on consolidating, modernizing, and reinventing government functions, we are exceptionally positioned due to the efficiencies we've established over decades of work. We're now able to bring our innovative commercial solutions to assist the federal government as they advance their agenda. The conversation is global, filled with opportunities dependent on various markets, and we hold a very strong position. I also want to highlight the 32 clients this quarter who each generated over $100 million in bookings.

Hi. Good morning. Thank you, Julie. Hope you're feeling well. I want to start on bookings. Can you just give us a sense on 2Q bookings? How they landed relative to your plan? Understanding just the elevated uncertainty may extend signings, I'm just curious if that did in fact play out in 2Q? And can you comment on how you feel you're set up for the second half in bookings?

Well, just as a reminder, that elevated uncertainty has been in the last few weeks and so, no impact on our bookings. And Angie, do you want to add anything?

Hi, Bryan. So for us, we were pleased with our bookings this quarter of $20.9 billion, and importantly, our book-to-bill was 1.3. Again, reinforcing and being the partner of choice for our clients with 32 clients with quarterly bookings over $100 million, so we feel really good about that.

Okay. And then on the workforce, can you comment on how you're managing that mix of subcontractors versus employees? And is that higher sub-con mix in the quarter just some form of a transition component as you've taken actions on bench across the organization, or are there certain service types where you're having to lean a little bit more on that sub-con mix?

Bryan, as you consider our subcontractor and workforce mix, it can certainly change from quarter to quarter based on the work we are doing for our clients. In this quarter, we added just over 2,000 people in Q2. Our main focus is on managing supply and demand, which we achieve through technology and reskilling. When looking at our overall workforce, the number of subcontractors may vary, but we are focused on our utilization rate, which remains at 91%, within our desired range.

Yes. Good morning. Thank you. Perhaps I'll ask my two just concurrently since they're on similar veins. On the first one, one of the previous questions was asking about AI, more from the demand side or revenue side. I wanted to go back to the supply side and delivery side, and while I think it's still early in the life of Gen AI because most of the work is actually still test, not inferencing, but are you seeing any changes in the nature of your economic relationship with your customers? In other words, are customers asking for some of the savings or is there any change in that narrative on how the supply side and economic relationship broadly speaking with your customers may unfold as Gen AI matures a little bit? And then the second part of the question is I wanted to just jump into Song for a bit. And sort of the same type of question. I spent the last day with Adobe and at their user group conference and there's tremendous efficiency gains associated with both marketing and creativity. And just, Julie, any comments, I know you mentioned Song had double-digit growth, which is quite impressive. How do you see the durable growth rate of Song? And so that's it for me. And Julie, all the best to you in particular.

Thanks, Keith. In response to the first question, what we’ve observed with Gen AI mirrors our experiences with new technologies in the past. For instance, when we launched MyWizard in 2015, now known as GenWizard, we witnessed a significant shift in automation, which remains pertinent today. We have not noted a substantial change in this pattern. Consistently, especially in managed services, our contracts anticipate increased efficiency from technology, and Gen AI has been enhancing that over time. The model we see is quite similar to previous technological efficiency waves. We aren’t observing new patterns emerging. Our strategy focuses on helping our clients effectively utilize Gen AI while also advancing our own applications of it. Nevertheless, it is still early in this technology's development and can be costly, requiring us to pinpoint the right return on investment for its use. Our clients must establish foundational elements since implementing Gen AI is not merely a matter of pushing a button. It’s important to recognize that we are at the beginning of this technological cycle. Regarding Song, one of our key roles is assisting clients in building the data infrastructure necessary for utilizing Gen AI. The efficiencies you see, and as you know we are a primary partner of Adobe, rely on a solid data foundation and the transformation of processes. We have experienced this in our own marketing efforts through Agentic AI, which necessitated a complete overhaul of our marketing strategies. Therefore, Song’s strength lies in establishing a digital core and supporting reinvention while also excelling in our use of Gen AI, which remains our focus. I’m optimistic about Song’s prospects. Importantly, our diversification aims to ensure relevance across all enterprise sectors, aligning with our growth agenda, which positions Song well in relation to our core operations and the entire enterprise. I am very pleased with how our strategy to maintain relevance across the enterprise continues to bolster our resilience in the market.

Great. Thanks for taking our questions. I want to clarify the change in the revenue outlook here. Your original outlook contemplated status quo at the high end of the outlook, is that still the case? And is that indexed to what you're seeing today with the elevated uncertainty, but not necessarily any sort of slowdown?

Hi, Jonathan. Thanks for the question, and yes, that's correct. So with our assumptions, the range of 5% to 7%, which we raised for the full year is that discretionary spend does not have to improve at the top end of the range and while at the bottom of the range, it allows for further deterioration.

Thank you, Julie. I want to extend my best wishes to you as well. When we consider the larger transformational contracts that are providing significant benefits this year, despite the slower discretionary spending or lack of improvement in that area, could you remind us of your current status on that front? Bookings had been a previous question, showing slight growth year-over-year, though your book-to-bill ratio remains robust. Please help us understand what you are observing with the most impactful contracts at this moment that could provide leverage despite the outcomes related to discretionary spending. Additionally, Julie, during our last conversation, you mentioned that executive decision-makers have been waiting on tariffs and the policies you discussed earlier. If there is a resolution in the upcoming months, particularly around April 2, how much feedback have you received from customers about their anticipation? There seems to be pent-up demand and budget—could you provide more clarity on that?

Sure. On the demand side, having 32 clients with bookings over $100 million demonstrates our execution of that strategy. Clients are looking for larger transformational deals and we are focused on delivering that. We continue to ensure we secure these larger deals since that aligns with demand. CEOs are concentrating on succeeding despite uncertainties. The discussions we are having are not about what happens if tariffs get resolved; instead, it’s about how to reinvent quickly in light of greater uncertainty compared to 90 days ago. CEOs recognize their responsibility to grow despite various challenges encountered during my six years as CEO. We remain committed to the characteristics that have made us a leader through various cycles, such as strong client relationships. Our top 100 clients have been with us for over 10 years, and we benefit from geographic and industry diversification. I want to acknowledge all my industry teams for their efforts, which have contributed to broad-based growth and diversification in our work. Additionally, our strong ecosystem relationships and leadership in Gen AI and technology are crucial to our resilient business model. Both ourselves and CEOs must be agile to thrive in any market, which our range reflects. The adjustment to the lower end of our range shows our confidence in our resilient model as we navigate forward. Well, thank you again for joining. Before we wrap up, I have two updates. First, as many of you know, last month, I did announce that I had recently been diagnosed with breast cancer. Just want to let everyone know I'm feeling good. My treatment is on track and my prognosis continues to be excellent. I have received so many well wishes, including on this call, and I just want to thank everyone for all of their support. It has meant a lot. I also want to thank Katie O'Conor, our Head of Investor Relations. She has been an amazing partner to me and to Casey, and now Angie for the last three years. We've asked her to take on a very important new role as the CFO of Avanade, our joint venture with Microsoft. I know we're all going to miss her in this role, and we're super excited to see Katie take on this next chapter of her very impressive career. So thank you very much, Katie. And I'm also very pleased to welcome Alexia Quadrani, who will become our new Head of Investor Relations. Alexia joins us from the Walt Disney Company, where she was the Executive Vice President of Investor Relations and Shareholder Services. Prior to that, she spent over 20 years as an Equity Analyst at JP Morgan. I know she's really looking forward to getting to know all of you in the days ahead, and I'm super happy to welcome her to Accenture. Finally, in closing, I want to thank all of our shareholders for your continued trust and support. We are working every day to continue to earn that trust. And finally, a huge thank you to all of our people for what you're doing every day, and I will speak with all of you next quarter. Thanks again for joining.

Thank you.