M+E Connections

Accenture Execs: Strong Digital, Cloud and Security Demand Gave Company Q3 Boost

Accenture continued to see strong demand for digital, cloud and security-related services in its third quarter (ended May 31), and those businesses – which the company refers to as “the New” for shorthand – for the first time, accounted for about 50% of its total revenue in the quarter, according to company executives.

It was “another strong quarter” for Accenture and one in which it achieved revenue growth in the upper end of its guidance range, CEO and chairman Pierre Nanterme told analysts on an earnings call June 22. He stressed the significance of achieving the 50% milestone in the New businesses, adding that Accenture’s goal is that, by 2020, the “vast majority” of its revenue will come from digital, cloud and security.

“We continue to build on our strong position in the marketplace,” he said, telling analysts Accenture was “gaining significant market share, growing, [on] average, twice as fast as the market” at a minimum in each market.

Accenture saw “strong double-digit growth in all three areas of the New” compared to the third quarter last year, CFO David Rowland said on the call. Revenue from those three businesses combined totaled $4.7 billion, according to the company.

“We continued to see positive growth in most geographic markets and industries, and while we saw encouraging signs in several areas of pressure previously noted, we did experience lower-than-expected revenues” in health and public service in North America, Rowland said. Accenture was, meanwhile, “very pleased with momentum in Europe and the growth markets,” which he said combined for 10% growth in the quarter.

The company continues to “invest significantly to acquire skill and capability in key growth areas,” and spent $1.2 billion so far this year, on seven transactions, Rowland also said.

Total revenue grew 5% in the quarter from a year ago, to $8.9 billion. But profit fell to $704.8 million ($1.05 a share) from $950.3 million ($1.41 a share). That, as well as the company lowering its margin forecast and warning about continued uncertainty in the North American healthcare industry, may have contributed to shares in the company trading 4.2% lower at $121.73 in afternoon trading June 22.

Communications, media and technology revenue grew to $1.75 billion from $1.71 billion, while financial services revenue increased to $1.87 billion from $1.80 billion, health and public service revenue inched up to $1.55 billion from $1.54 billion, products revenue grew to $2.43 billion from $2.16 billion, and resources revenue increased to $1.25 billion from $1.22 billion.

North American revenue grew to $4.12 billion from $4.02 billion, while European revenue increased to $3.04 billion from $2.95 billion and growth markets revenue jumped to $1.70 billion from $1.47 billion.

Separately, Accenture predicted in a new report, released June 21, that businesses successfully applying artificial intelligence (AI) could increase profitability by an average of 38% by 2035. The report, “How AI Boosts Industry Profits and Innovation,” was developed by Accenture Research in collaboration with Frontier Economics, and also projected that the introduction of AI could lead to an economic boost of $14 trillion in additional gross value added (GVA) across 16 industries in 12 economies.