Contents
In my June 27, 2025 Accenture (ACN) post, I disclose my decision to initiate a position through a 'Core' account in the FFJ Portfolio. The company's share price has experienced weakness following this initial purchase. My long-term outlook for the company, however, remains positive. I have, therefore, been adding to my exposure and disclose increases to my exposure in this July 29, 2025 post and August 13, 2025 post.
The company has clearly fallen out of favor with many short-term investors. Investors with a long-term investment time horizon, however, should welcome opportunities when great companies temporarily fall out of favor.
With the release of Q4 and FY2025 results and FY2026 guidance on September 25, I revisit this existing holding and disclose the purchase of an additional 100 shares @ ~$236.25. My ACN exposure is now 800 shares.
Business Overview
ACN is a leading global professional services company that helps the world’s leading organizations build their digital core, optimize their operations, accelerate revenue growth and enhance services.
The company works across every major market with more than 9,000 clients, including the world's largest companies and 75% of the Fortune Global 100 and 500.
ACN is arguably the world’s leading professional services company with more than 779,000 employees serving clients in more than 120 countries. Given the current business environment, some industry participants will likely cease to exist over the next few years. New industry participants are also being created as employees from existing industry participants decide to enter the fray and create their own firms. Many existing and new professional services companies, however, can not compete directly with ACN.
I provide a very high level business overview in my June 27, 2025 post. The best way to learn about the company, however, is to review the company's website and to read the FY2024 Form 10-K (the FY2025 Form 10-K is unavailable as I compose this post) that is accessible through the SEC Filings section of the company's website.
Research and Development
I view ACN as the best-of-breed IT services company. This is thanks to its prominent reputation, established customer base, and deep technological expertise.
In order to remain at the forefront, ACN invests heavily in research and development (R&D). In FY2020 - FY2024 , R&D expenses were $0.871B, $1.118B, $1.123B, $1.299B, and $1.150B. The FY2025 Form 10-K is currently unavailable, and therefore, I am unable to determine ACN's FY2025 R&D expenses. With total operating expenses of ~$59.447B in FY2025, I envision ACN has once again incurred R&D expenses in excess of $1B.
Capital Expenditures
Given the magnitude of ACN's international operations, it is not surprising that it incurs significant annual CAPEX. Purchases of property and equipment in FY2020 - FY2025 amount to $0.599B, $0.58B, $0.718B, $0.528B, $0.517B, and $0.6B.
Annual purchases of businesses and investments (net of cash acquired) are more significant. In FY2020 - FY2025, ACN invested $1.532B, $4.171B, $3.448B, $2.531B, $6.583B, and $1.471B.
Financials
FY2025 Results
ACN's FY2025 results are reflected in the Form 8-K that was uploaded to the SEC Filings section of ACN's website on September 25.
Annual revenue grew 7% (the majority being organic and broad-based across markets, industries and types of work) with the addition of $5B in revenue and more than $80B in bookings. This performance was achieved despite a challenging macroeconomic backdrop.
In Q4, the company added 37 clients with quarterly bookings greater than $100 million bringing it to a record of 129 such bookings for the year. It also finished the year with 305 Diamond clients which represent ACN's largest relationships.
New bookings were $21.3B in Q4, representing 6% growth in U.S. dollars and 3% growth in local currency.
Consulting bookings were $8.9B with a book-to-bill of 1.0. Managed services bookings were $12.4B with a book-to-bill of 1.4. Overall book-to-bill was 1.2.
In Q4 2025, ACN initiated a 6-month business optimization program for which it recorded a $0.615B charge. The company also expects to record an additional ~$0.25B charge in Q1 2026 for a total of ~$0.865B.
The two part business optimization program consists of:
- rapid talent rotation which reflects severance associated with headcount reductions;
- the divestiture of two acquisitions that no longer align with ACN's strategic priorities.
These actions will result in cost savings that will be reinvested in the company.
ACN issues additional important information, such as the following, for Q1 - Q3 but does not do so for Q4. The company's most recently provided return metrics are found below and are accessible in supporting materials.
Accenture Federal Services
In my June 27, 2025 post, I reflect:
The US federal government accounts for ~8% of ACN's revenues.
This segment of the company has contracts with the US government that have been affected by the Trump administration's efforts to reduce spending. Existing contracts are being cancelled and a slowdown in new work present a headwind for revenue growth in Q4.
ACN is one of 10 consulting firms (Booz Allen Hamilton, Deloitte, Leidos, Ernst and Young, McKinsey, and Guidehouse are others) that was specifically asked to relinquish contracts or cut prices to save the government money. 28 ACN contracts have been 'terminated for convenience' since Trump’s inauguration in January. These include four large umbrella contracts that together authorize ~$1B in spending from the health and human services, interior and Treasury departments.
As evidence of the sharp slowdown in new work from the US Federal government, ACN is set to be paid $0.643B for work commissioned in Q3 2025 which is a little more than half in Q3 2024.
ACN states that it is premature to make assumptions about FY2026.
On the September 25, 2025 earnings call with analysts, ACN's CEO states:
We do see procurement is now starting to pick up, although it's still slower than it has been in the past. The demand in Federal is very much around modernization, consolidation, efficiency. Tech is at the center.
So lots of demand around ERP and platforms.
Our position with the ecosystem is really key here and our strategy to expand to that partnership -- those partnerships is also important. We're really pleased with our new partnership with Palantir, which is really playing a critical role in Federal.
Conventional And Modified Free Cash Flow (FCF) Calculations (FY2015 - FY2025)
In my September 28, 2024 How Stock Based Compensation Distorts Free Cash Flow post, I touch upon how a company's FCF can be distorted. In several subsequent posts, I take a conservative approach when looking at a company's FCF.
FCF is a non-GAAP measure, and therefore, the manner in which it is computed is open to debate. Most companies subtract capital expenditures (CAPEX) from Net Cash Provided by Operating Activities found in the Consolidated Statement of Cash Flows. They do not, however, deduct share-based compensation (SBC). Given the magnitude of ACN's SBC, I think it is prudent to deduct it.
We see that the magnitude of ACN's SBC has a material impact on the company's FCF.
FY2026 Outlook
The following reflects ACN's FY2026 outlook.
The Q1 2026 outlook is:
- Revenue: $18.1B - $18.75B
- Revenue Growth (Local Currency): 1% - 5%
- Foreign-Exchange Impact on Results: ~+1%
In FY2026, ACN expects to increase its overall headcount overall across its 3 markets.
Risk Assessment
The potential return of an investment is important but so is the risk aspect. This is why I am particularly interested in the maturity schedule of a company's long-term debt as well as the interest rates (amongst other things).
Unless ACN's ability to generate strong cash flow takes a dramatic turn for the worse, meeting the staggered long-debt debt maturities should pose no issue.
At FYE2025, ACN's current portion of long-term debt was $114.484 million and the long-term portion was ~$5.034B. These values are relatively similar to what ACN reported at the end of Q3 2025 (a similar Borrowings and Indebtedness schedule will be provided in the Form 10-K which is to be released at a later date).
ACN's Aa3 long term issuer rating was affirmed by Moody's on October 1, 2024 with a stable outlook. This is the bottom tier of the high grade investment grade category.
S&P last reviewed ACN on April 24, 2025 at which time it affirmed its AA- rating with a stable outlook. This is the bottom tier of the high grade investment grade category.
Moody's and S&P Global define ACN as having a very strong capacity to meet its financial commitments. It differs from the highest-rated obligors only to a small degree.
On October 1, 2024, Fitch affirmed ACN's long term issuer default rating of A+ with a stable outlook. This is the top tier of the upper medium grade investment grade category. This rating is one tier lower than the ratings assigned by Moody's and S&P Global.
On August 8, 2025, Fitch affirmed Accenture plc's Long- and Short-Term Issuer Default Ratings at 'A+' and 'F1', respectively. It also affirmed the 'A+' senior unsecured ratings and 'F1' commercial paper ratings of Accenture plc's wholly-owned subsidiaries and co-issuers, Accenture Capital Inc. and Accenture Global Capital DAC. Fitch, however, has withdrawn all ratings and will no longer provide rating or analytical coverage on Accenture Plc, Accenture Capital Inc. and Accenture Global Capital DAC. It has chosen to withdraw the ratings for Accenture plc and its co-issuers for commercial reasons.
Fitch's withdrawn rating defines ACN as having a strong capacity to meet its financial commitments. It is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligors in higher-rated categories.
Dividends
ACN distributes a quarterly dividend (see history).
The company's Board has recently declared a quarterly cash dividend of $1.63/share to be paid on November 14. This is a ~10% increase over the prior $1.48 quarterly dividend.
Investors, however, would be wise not to fixate and/or invest based on dividend metrics. The focus should be on total potential shareholder return and the company's ability to effectively allocate capital.
The company's Board has recently approved $5B of additional share repurchase authority.
Looking at the table reflected in the Conventional And Modified Free Cash Flow (FCF) Calculations (FY2015 - FY2025) section of this post, we see that the diluted weighted average shares outstanding in FY2015 was 678.757 million. In FY2025, this had been reduced to 632.4 million and 629.4 million in Q4 2025. This reduction is impressive considering the magnitude of the shares ACN issues as part of its various employee compensation packages (see SBC in each year).
The following reflects ACN's share repurchases in the first 3 quarters of FY2025.
In Q4, ACN repurchased or redeemed 1.6 million shares for $0.474B at an average price of $295.45/share.
In FY2025, it returned ~$3.7B (~$3.24B in FY2024) and ~$4.62B (~$4.52B in FY2024) to shareholders in the form of dividends and share repurchases for a total of ~$8.32B.
The FY2026 outlook calls for a return of at least $9.3B. If it returns ~$4.2B to shareholders in the form of dividends, it is likely at least ~$5.1B will be returned in the form of share repurchases. ACN's share price remaining under pressure bodes well for share repurchases!
Valuation
ACN reported FY2025 diluted EPS of $12.15 - well below the $12.77 - $12.89 forecast. On the bright side, however, ACN's FY2025 FCF of ~$10.874B is favorable relative to management's ~$9B - ~$9.7B outlook (conventional method calculation).
When I initially tried to estimate ACN's valuation, I used ~632 million as my FY2025 weighted average diluted shares outstanding. The actual figure was just over 632.4 million.
My prior valuation estimates are 'blown out of the water' given the significant disparity between management's prior outlook and the actual results.
Management's FY2026 adjusted diluted EPS outlook is $13.52 - $13.90. Using my ~$236.25 September 25 purchase price, the forward adjusted diluted PE range is ~17 - ~17.5.
Using the current broker adjusted diluted EPS estimates, ACN's forward-adjusted diluted PE levels are:
- FY2026 - 24 brokers - ~17.2 based on a mean of $13.76 and low/high of $13.48 - $13.94.
- FY2027 - 22 brokers - ~15.9 based on a mean of $14.88 and low/high of $13.98 - $15.69.
- FY2028 - 11 brokers - ~14.7 based on a mean of $16.07 and low/high of $14.84- $16.67.
Revisions to these estimates are currently in progress and are likely to continue over the coming days.
The company's FCF/EPS ratio is generally well in excess of 100% when calculated using the conventional method and roughly 100% when calculated using the modified method. This is because ACN's annual SBC is sizable.
ACN's FY2026 FCF outlook is ~$9.8B - ~$10.5B (conventional method calculation). In FY2023, FY2024 and FY2025, the diluted weighted average shares outstanding was 638.592 million, 635.94 million, and 632.435 million (629.418 million in Q4 2025).
As noted in the Share Repurchases section of this post, I anticipate ACN will repurchase ~$5.1B of its shares in FY2026. It will, however, issue shares to its employees. If it can repurchase shares at attractive valuations, we could see the Q4 2026 weighted average shares outstanding being close to 624 million thus giving us a FY2026 average of ~626.71 ((629.418 + 624)/2).
Taking the ~$10.15B mid point of management's FY2026 FCF outlook and ~626.71 million shares, we get ~$16.20 in FCF/share. Divide ~$236.25 by ~$16.20 and the P/FCF is ~14.6.
My preference is to calculate P/FCF using the 'modified FCF' method which takes into consideration SBC.
ACN's FY2025 and FY2024 SBC was ~$2.094B and ~$1.942B. If it increases to $2.25B in FY2026 and we deduct this from the ~$10.15B mid point of management's FY2026 FCF outlook, we get a FY2026 FCF outlook of ~$7.9B. Divide this by ~626.71 million shares and we get ~$12.61 in FCF/share. Divide ~$236.25 by ~$12.61 and the P/FCF is ~18.8.
For comparison, this is what I reflect in my July 29, 2025 post at which time I initiated my ACN position.
In the first 9 months of FY2025, ACN generated $9.90 of diluted EPS and the current FY2025 diluted EPS outlook is $12.77 - $12.89. Using my recent ~$284.58 purchase price, the forward diluted PE range is ~22.1 - ~22.3.
Using the current broker adjusted diluted EPS estimates, ACN's forward-adjusted diluted PE levels are:
- FY2025 - 19 brokers - ~22.1 based on a mean of $12.88 and low/high of $12.81 - $13.02.
- FY2026 - 20 brokers - ~20.6 based on a mean of $13.80 and low/high of $13.48 - $14.16.
- FY2027 - 13 brokers - ~19 based on a mean of $14.97 and low/high of $14.37- $15.55.
Although I look at brokers' earnings estimates, all estimates beyond the current fiscal year have no bearing on my investment decision making process. My reasoning is that I have no confidence that anybody can consistently and accurately determine a company's performance as we go further out on the calendar. The variance in the brokers' earnings estimates clearly indicates there is no consensus on ACN's future performance.
EPS can also be distorted by various means. My preference, therefore, is to gauge a company's valuation using FCF.
ACN's FY2025 FCF outlook is ~$9B - ~$9.7B (calculated under the conventional method). In FY2023, FY2024 and Q3 2025, the diluted weighted average shares outstanding was 638.592 million, 635.94 million, and 630.457 million. ACN plans to acquire additional shares in Q4 so if the FY2025 weighted average is reduced to ~632 million, we can expect ACN's FY2025 FCF/share to be ~$14.24 - ~$15.35. Using my recent ~$284.58 purchase price, the P/FCF is ~18.5 - ~20.
As noted earlier, however, my preference is to calculate P/FCF using the 'modified FCF' method which takes into consideration SBC.
ACN's YTD2025 SBC is ~$1.654B or ~$0.551B/quarter. If ACN's FY2025 SBC amounts to $2.205B (~$1.654B + ~$0.551B) and we deduct this from management's ~$9B - ~$9.7B FY2025 FCF outlook, the FY2025 FCF is ~$6.795B - ~$7.495B. We arrive at FCF ~$10.75 - ~$11.86 when we divide this range by ~632 million shares. Using my recent ~$284.58 purchase price, the P/FCF is ~24 - ~26.5.
Final Thoughts
In my July 29, 2025 post I wrote:
I view ACN as one of the best professional services providers with a prominent reputation, established customer base, and deep technological expertise. The company has the capability/expertise to deliver end-to-end business solutions thus eliminating the need for customers to source different services from several suppliers which can potentially lead to project delays and cost overruns.
The US Federal government has expressed the need to reduce consulting expenditures which will impact ACN to some extent. The company, however, should fare better than many of its competitors given its expertise and diverse customer base.
As AI is introduced in the workforce, it poses significant threats to lower-end information technology (IT) services, such as infrastructure management and business process outsourcing. The reasoning is that AI is apt to perform better in handling repetitive and mechanical business processes. ACN's strength, however, is in higher-end services (ie. consulting and system integration) since a relatively high level of human input is required to tailor solutions for customers.
I anticipate that ACN will remain a dominant player in the IT services industry. As noted earlier, ACN employs ~791,000 employees and has operations in more than 120 countries. If there is to be any industry consolidation, I envision ACN's position of strength growing over time.
ACN's annual revenue was relatively stagnant in FY2022 - FY2024 ($61.594B, $64.112B, and $64.896B). It has, however, generated $52.077B of YTD2025 revenue and the forecast is for an additional $17B - $17.6B in Q4. If this materializes, this would raise ACN's FY2025 revenue to ~$69.077B - ~$69.677B. Despite increased economic volatility and geopolitical uncertainty that can lead to IT spending delays, ACN's annual revenue in FY2030 could reach ~$80B - ~$82B.
My long-term outlook for ACN remains the same.
The investment community is not reacting kindly to ACN's FY2025 results and FY2026 outlook thereby leading to the share price coming under considerable pressure.
If you are a short-term investor, ACN's share price behavior may be disconcerting. If you are a long-term investor and think ACN has a strong probability of still being a great company over the long-term, you should welcome share price weakness as it permits share repurchases at more attractive valuations.
ACN's senior management has considerable 'skin in the game' which suggests their interests are closely aligned with shareholders. Although short- and mid-term performance is important, senior management manages the business with the company's long-term success at top of mind. Investors should, therefore, think like great business owners who understand the importance of long-term thinking.
I wish you much success on your journey to financial freedom!
Note: Please send any feedback, corrections, or questions to [email protected].
Disclosure: I am long ACN.
Disclaimer: I do not know your circumstances and do not provide individualized advice or recommendations. I encourage you to make investment decisions by conducting your own research and due diligence. Consult your financial advisor about your specific situation. I wrote this article myself and it expresses my own opinions. I do not receive compensation for it and have no business relationship with any company mentioned in this article.
