Accenture (ACN)

Global professional services company Accenture (NYSE:ACN) reported Q3 CY2025 results beating Wall Street’s revenue expectations, with sales up 7.3% year on year to $17.6 billion. The company expects next quarter’s revenue to be around $18.43 billion, close to analysts’ estimates. Its GAAP profit of $2.25 per share was 24.5% below analysts’ consensus estimates.

Company Overview

With a workforce of approximately 774,000 people serving clients in more than 120 countries, Accenture (NYSE:ACN) is a professional services firm that helps organizations transform their businesses through consulting, technology, operations, and digital services.

IT Services & Consulting companies stand to benefit from increasing enterprise demand for digital transformation, AI-driven automation, and cybersecurity resilience. Many enterprises can't attack these topics alone and need IT services and consulting on everything from technical advice to implementation. Challenges in meeting these needs will include finding talent in specialized and evolving IT fields. While AI and automation can enhance productivity, they also threaten to commoditize certain consulting functions. Another ongoing challenge will be pricing pressures from offshore IT service providers, which have lower labor costs and increasingly equal access to advanced technology like AI.

Accenture's main competitors include other global professional services firms such as Deloitte, PwC, EY, and KPMG, as well as technology consulting companies like IBM (NYSE:IBM), Cognizant (NASDAQ:CTSH), Infosys (NYSE:INFY), and Capgemini (OTCMKTS:CAPMF).

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

With $69.67 billion in revenue over the past 12 months, Accenture is a behemoth in the business services sector and benefits from economies of scale, giving it an edge in distribution. This also enables it to gain more leverage on its fixed costs than smaller competitors and the flexibility to offer lower prices.

As you can see below, Accenture’s 9.5% annualized revenue growth over the last five years was impressive. This shows it had high demand, a useful starting point for our analysis.

Long-term growth is the most important, but within business services, a half-decade historical view may miss new innovations or demand cycles. Accenture’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.2% over the last two years was well below its five-year trend.

This quarter, Accenture reported year-on-year revenue growth of 7.3%, and its $17.6 billion of revenue exceeded Wall Street’s estimates by 1.3%. Company management is currently guiding for a 4.2% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 4.7% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its newer products and services will not lead to better top-line performance yet.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Accenture’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 14.7% over the last five years. This profitability was top-notch for a business services business, showing it’s an well-run company with an efficient cost structure.

Looking at the trend in its profitability, Accenture’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Accenture generated an operating margin profit margin of 11.6%, down 2.7 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Accenture’s solid 9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Accenture, its two-year annual EPS growth of 6.2% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Accenture reported EPS of $2.25, down from $2.66 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Accenture’s full-year EPS of $12.15 to grow 13.3%.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Accenture has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the business services sector, averaging 14.7% over the last five years.

Taking a step back, we can see that Accenture’s margin dropped by 1 percentage points during that time. It may have ticked higher more recently, but shareholders are likely hoping for its margin to at least revert to its historical level. If the longer-term trend returns, it could signal it is in the middle of an investment cycle.

Accenture’s free cash flow clocked in at $3.81 billion in Q3, equivalent to a 21.6% margin. This result was good as its margin was 2.3 percentage points higher than in the same quarter last year. Its cash profitability was also above its five-year level, and we hope the company can build on this trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Accenture hasn’t been the highest-quality company lately, it found a few growth initiatives in the past that worked out wonderfully. Its five-year average ROIC was 39.6%, splendid for a business services business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Accenture’s ROIC has decreased significantly over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Accenture is a profitable, well-capitalized company with $11.48 billion of cash and $7.45 billion of debt on its balance sheet. This $4.03 billion net cash position is 2.7% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

It was good to see Accenture narrowly top analysts’ revenue expectations this quarter. On the other hand, its EPS missed. Looking ahead, revenue guidance was in line with expectations. Overall, this was a mixed quarter. The stock remained flat at $239 immediately following the results.

Updated: December 4, 2025 at 11:22 PM EST

Before deciding whether to buy Accenture or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

We think Accenture is a solid business. First off, its revenue growth was impressive over the last five years. And while its diminishing returns show management's recent bets still have yet to bear fruit, its scale makes it a trusted partner with negotiating leverage. On top of that, its stellar ROIC suggests it has been a well-run company historically.

Accenture’s P/E ratio based on the next 12 months is 19.8x. Looking at the business services space right now, Accenture trades at a compelling valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $277.08 on the company (compared to the current share price of $269.10), implying they see 3% upside in buying Accenture in the short term.