What happened?
Accenture released soft Q2 FY 24 with group''s net revenue flat at cc (vs cons. +0.7%) of which -3% at cc for the consulting business and c.+3% growth at cc for Managed services. Looking at geography, the global Accenture business was flat in the US, down -2% in EMEA and up +6% in Growth markets. By client segment, soft performance for Communications, Media and Tech (-7%) and financial services (-6%) were offset by growth for Health and Public service (+10%), and Resources (+4%).
Accenture lowered its FY 24 guidance net revenue from +2/+5% to +1/+3% (vs cons.) while also lowering the op margin (non-GAAP) guide from 15.5-15.7% to 15.5% (consensus was 15.6% and BNPP at 15.7%). It is unclear if the new FY guide embeds an uplift in MandA contribution from the current 2%+ guidance, which would imply a greater organic downgrade.
Q3 rev guidance of -1% to +3% is lower than the +3.7% consensus. This also suggests that it is possible we have not yet seen a bottoming of growth, which could come in FQ3 (although we believe the 0% in FQ2, down from 1% in FQ1, will be the bottom). Using the mid-point of Q3, Accenture is implying 5-6% c/c growth in Q4 to reach the mid-point of the new FY guide.
For more detail please see Stefan''s first take on Accenture Q2 (ACCENTURE: 2Q''24 FIRST TAKE: Near term still weak, but acceleration set to begin)
BNPP Exane View:
Accenture weak consulting performance is a negative read across for digital business transformation segment of advertising agencies.
Among top Agencies, Publicis is the most exposed to the DBT segment through Sapient (c.17% of group net revenue in 2023).
While the read across is negative, it is important to note that Publicis has guided for negative OSG in calendar Q1 24 for Sapient (we model -2%) but improving vs Q4 trend (-4%). Also, we only assume +3% OSG for Sapient in 2024. If we were to assume +2% (in line with the mid-point of Accenture guidance), this would have c.20bp impact on group...
