Accenture’s Gen AI bets pay off with $3 bn in bookings

  • Accenture reported robust revenue in generative AI bookings for the quarter and year ended August. The interest in Gen AI is rising, though widespread adoption remains cautious amid macroeconomic uncertainties

Jas Bardia
Published27 Sep 2024, 11:11 AM IST
Accenture reported $400 million, $650 million, and $900 million in Gen AI projects for the first, second and third quarters respectively.. (Photo: Bloomberg)
Accenture reported $400 million, $650 million, and $900 million in Gen AI projects for the first, second and third quarters respectively.. (Photo: Bloomberg)

Bengaluru: Accenture Plc, the world’s largest software services company, secured $1 billion in generative AI (Gen AI) bookings in the quarter-ended August, bringing the total order in the segment to $3 billion for the full year (September-August). 

This growth comes despite a sequential revenue decline, reflecting rising interest in the new technology, even as companies remain cautious about adoption.

Overall, Gen AI projects accounted for 4% of the Dublin-headquartered company’s $81.2 billion total order bookings for the year, a 12.5% increase year-on-year. 

"For the full fiscal year, we had nearly $900 million in revenue. …In FY23, we had approximately $300 million in sales and roughly $100 million in revenue from GenAI. This was an area where our clients continued to buy small deals, and we focused on accelerating our growth here,” said Julie Sweet, chair and chief executive officer of Accenture, in the post-earnings conference call with analysts on Thursday.

Also Read: Accenture secures GenAI orders worth $2 billion in first nine months of FY24

Accenture was the first software services company to state the deal value revenue from Gen AI in June last year when it won $100 million in pure-play Gen AI projects in the quarter. Homegrown information technology services companies have yet to spell out revenue from pure-play Gen AI projects or define a roadmap for the new technology. 

Accenture reported $400 million, $650 million, and $900 million in Gen AI projects for the first, second and third quarters respectively.

“We believe the introduction of GenAI signifies a transformative era that is set to drive growth for us and our clients over the next decade much like digital technology has in the last decade and continues to do so,” added Sweet.

Gen AI entered public discourse with the launch of Chat GPT in November 2022. The new technology shot to fame for its quick content generation abilities in video, audio, and written form merely by entering a prompt.

Also Read | Mint Explainer: What OpenAI o1 ‘reasoning’ model means for the future of GenAI

While Accenture has reported strong Gen AI bookings, analysts note that the technology still struggles to move beyond the proof-of-concept phase and achieve widespread real-time adoption.

Last year saw slow growth in the software services sector, as Fortune companies held back tech spending amid macroeconomic uncertainty. As demand for software services lagged, Accenture, which missed its growth targets, closed the year with $64.9 billion in revenue—up just 1.24% from the previous year. The company's revenue in the August quarter remained unchanged, slipping 0.37% sequentially, but up 2.6% compared to the year-ago period.

The outlook remains cautious, with Accenture forecasting modest full-year revenue growth of 3-6% for the year ended August 2025, factoring in ongoing economic headwinds. Analysts suggest this guidance reflects the company's conservative stance. 

“Additionally, the guide at the high end implies a steady macroeconomic backdrop while the low end of the guide has room for deterioration in the macro backdrop,” said BMO Capital Markets analyst Keith Bachman in a note dated 26 September.

While the US Federal Reserve's interest rate cut might have stoked optimism among analysts about a demand recovery for software services spending, Sweet flagged concerns.

In reply to a question on the macro environment and return of discretionary spends, Sweet said, “Well, the environment is really more of the same and that environment has been kind of a cautious environment. Right now, they're going into budget season. So as always, we'll really see in January and in February, but there hasn't been much of a change, right? The macro is kind of the same.” 

“So we're not hearing -- I'm not hearing from CEOs, and I'm talking to them almost every day, some big like, hey, now we're ready to go spend more, right, in discretionary spending. So it's really just more of the same,” the CEO added.

Analysts also said that Sweet was playing safe. “They are playing safe with guidance but the macro environment is uncertain with a US election in the mix and the level of global instability,” said Ray Wang, founder and principal analyst of Constellation Research.

BMO’s Bachman said clients would not increase their budgets because of Gen AI but would only reprioritise it. 

“Accenture believes that generative AI has not been, and will not be, additive to budgets. In other words, we think that total budgets are set, and it is up to CTOs/CIOs to determine how much of that budget should go to generative AI versus other IT spend,” said Bachman. “We believe that Accenture will gain share of AI workloads, though AI remains a relatively small part of total revs/ bookings at this juncture.”

Accenture, which ended the year with about 774,000 employees, added 24,000 people last quarter. Sweet said much of this hiring is from India and the company is looking to hire more from the country without quantifying any number.

Also read | India’s generative AI startups look beyond building ChatGPT-like model

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First Published:27 Sep 2024, 11:11 AM IST
Business NewsCompaniesAccenture’s Gen AI bets pay off with $3 bn in bookings

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