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Item 7. Management’s Discussion and Analysis

2025-10-10 compared with 2024-10-10 · 81 added, 82 removed, 229 unchanged (42% of the section changed)

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Revenues by Segment/Geographic Market

Our three reportable operating segments are our geographic markets, North America, EMEA and Growth Markets.

Our three reportable operating segments are our geographic markets, the Americas, EMEA and Asia Pacific.

In addition to reporting revenues by geographic market and industry group, we also report revenues by two types of work:

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Geographic Markets

North America (1) $ 30,741 $ 30,296 1 % 2 %

Americas (1) $ 35,057 $ 32,552 8 % 9 %

EMEA 24,644 22,818 8 6

Growth Markets (1) (2) 11,338 11,524 (2) 7

Asia Pacific (1) 9,972 9,526 5 4

Total Revenues $ 69,673 $ 64,896 7 % 7 %

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Total Revenues $ 69,673 $ 64,896 7 % 7 %

Amounts in table may not total due to rounding.

(1) In the first quarter of fiscal 2025, our Latin America market unit will move from Growth Markets to North America.

With this change, North America will become the Americas market and Growth Markets will become the Asia Pacific market.

(2) During the first quarter of fiscal 2024, we revised the reporting of our geographic markets for the movement of our Middle East and Africa market units from Growth Markets to Europe, and the Europe market became our EMEA (Europe, Middle East and Africa) geographic market.

(1) During the first quarter of fiscal 2025, our Latin America market unit moved from Growth Markets to North America.

With this change, North America became the Americas market and Growth Markets became the Asia Pacific market.

Prior period amounts have been reclassified to conform with the current period presentation.

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The following revenues commentary discusses the primary drivers of local currency revenue changes by geographic market for fiscal 2025 compared to fiscal 2024:

• North America revenues increased 2% in local currency, led by growth in Public Service and Industrial, partially offset by declines in Banking & Capital Markets, Communications & Media and Software & Platforms.

• Americas revenues increased 9% in local currency, led by growth in Banking & Capital Markets, Industrials and Software & Platforms.

Revenue growth was driven by the United States.

• EMEA revenues were flat in local currency, as growth in Public Service was offset by declines in Communications & Media and Banking & Capital Markets.

Revenues were driven by an increase in Italy, offset by declines in France and the United Kingdom.

• Growth Markets revenues increased 7% in local currency, led by growth in Banking & Capital Markets, Industrial and Chemicals & Natural Resources.

Revenue growth was driven by Japan and Argentina, partially offset by declines in Australia and Brazil.

Argentina revenues grew in local currency due primarily to hyperinflation.

• EMEA revenues increased 6% in local currency, led by growth in Public Service, Life Sciences, Insurance, Health and Consumer Goods, Retail & Travel Services.

Revenue growth was driven by the United Kingdom and Germany, partially offset by a decline in France.

• Asia Pacific revenues increased 4% in local currency, led by growth in Utilities, Banking & Capital Markets, Public Service and Insurance, partially offset by a decline in Chemicals & Natural Resources.

Revenue growth was driven by Japan and Australia, partially offset by a decline in Singapore.

Operating Expenses

Operating expenses for fiscal 2024 decreased $1 million from fiscal 2023, and decreased as a percentage of revenues to 85.2% from 86.3% during this period.

Operating expenses for fiscal 2025 increased $4,147 million over fiscal 2024, and increased as a percentage of revenues to 85.3% from 85.2% in fiscal 2024.

The primary categories of operating expenses include Cost of services, Sales and marketing and General and administrative costs.

Cost of services is primarily driven by the cost of people serving our clients, which consists mainly of compensation, subcontractor and other payroll costs, and non-payroll costs such as facilities, technology and travel.

Cost of services includes a variety of activities such as:

contract delivery;

recruiting and training;

software development;

and integration of acquisitions.

Cost of services is primarily driven by the cost of people serving our clients, which consists mainly of compensation and other payroll costs, as well as non-payroll costs such as subcontractors, facilities, technology and travel.

Cost of services and the related gross margin may be impacted by several factors, including contract profitability, which includes the pricing on the work that we sell, as well as by the investments we make in our business and our people, such as research and development to build assets, platforms and industry and functional solutions, learning and professional development and strategic acquisitions.

Sales and marketing costs are driven primarily by compensation costs for business development activities;

ACCENTURE 2024 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 43

marketing- and advertising-related activities;

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General and administrative costs primarily include costs for people that are non-client-facing, information systems, office space and certain acquisition-related costs.

ACCENTURE 2025 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 37

Operating expenses by category are as follows:

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Cost of Services

Cost of services for fiscal 2024 increased $354 million, or 1%, over fiscal 2023, and decreased as a percentage of revenues to 67.4% from 67.7% during this period.

Gross margin for fiscal 2024 increased to 32.6% compared to 32.3% in fiscal 2023.

The increase in gross margin for fiscal 2024 was primarily due to lower labor costs, partially offset by higher non-payroll costs, primarily for travel compared to fiscal 2023.

Cost of services for fiscal 2025 increased $3,703 million, or 8%, over fiscal 2024, and increased as a percentage of revenues to 68.1% over 67.4% during this period.

Gross margin for fiscal 2025 decreased as a percentage of revenues to 31.9% from 32.6% during fiscal 2024.

The decrease in gross margin was primarily due to higher payroll costs.

Sales and Marketing

Sales and marketing expense for fiscal 2024 increased $264 million, or 4%, over fiscal 2023, and increased as a percentage of revenues to 10.6% over 10.3% during this period due to higher selling and other business development costs.

Sales and marketing expense for fiscal 2025 increased $197 million, or 3%, over fiscal 2024, and decreased as a percentage of revenues to 10.1% from 10.6% during this period due to lower payroll and non-payroll costs.

General and Administrative Costs

General and administrative costs for fiscal 2024 increased $5 million over fiscal 2023, and decreased as a percentage of revenues to 6.6% from 6.7% during this period.

General and administrative costs for fiscal 2025 increased $70 million, or 2%, over fiscal 2024, and decreased as a percentage of revenues to 6.2% from 6.6% during this period primarily due to lower payroll costs.

Business Optimization Costs

During fiscal 2024 and 2023, we recorded business optimization costs of $438 million and $1,063 million, respectively, primarily for employee severance.

These business optimization initiatives were completed as of August 31, 2024.

During the fourth quarter of fiscal 2025, we initiated business optimization actions and recorded $615 million in related costs, which includes $344 million related to a talent rotation that we are making in a compressed timeline, as well as asset impairments of approximately $271 million primarily related to the divestiture of two acquisitions that are no longer aligned with our strategic priorities.

During fiscal 2024, we recorded business optimization costs of $438 million associated with actions initiated in fiscal 2023 and completed in fiscal 2024, primarily for employee severance.

For additional information, see Note 1 (Summary of Significant Accounting Policies) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Non-GAAP Financial Measures

We have presented operating income, operating margin, effective tax rate and diluted earnings per share on a non-GAAP or “adjusted” basis excluding the business optimization costs recorded in fiscal 2024 and fiscal 2023, and, with respect to effective tax rate and diluted earnings per share, the impact of an investment gain recorded in fiscal 2023, as we believe doing so facilitates understanding as to the impact of these items and our performance in comparison to the prior periods.

We have presented operating income, operating margin, effective tax rate and diluted earnings per share on a non-GAAP or “ adjusted ” basis exclu ding the business optimization costs recorded in fiscal 2025 and 2024 as we believe doing so facilitates understanding as to the impact of these items and our performance in comparison to the prior periods.

While we believe that this non-GAAP financial information is useful in evaluating our operations, this information should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP.

ACCENTURE 2024 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 44

Operating Income and Operating Margin

Operating income and operating margin for each of the geographic markets are as follows:

Operating income and operating margin for each of the geographic markets is as follows:

(in millions of U.S.

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Margin Increase

North America $ 4,952 16 % $ 4,474 15 % $ 479

Americas (1) $ 5,324 15 % $ 5,080 16 % $ 245

EMEA 3,091 13 2,804 12 287

Growth Markets (1) 1,840 16 1,853 16 (13)

Asia Pacific (1) 1,810 18 1,713 18 98

Total $ 10,226 14.7 % $ 9,596 14.8 % $ 630

Amounts in table may not total due to rounding.

(1) During the first quarter of fiscal 2024, we revised the reporting of our geographic markets for the movement of our Middle East and Africa market units from Growth Markets to Europe, and the Europe market became our EMEA (Europe, Middle East and Africa) geographic market.

(1) During the first quarter of fiscal 2025, our Latin America market unit moved from Growth Markets to North America.

With this change, North America became the Americas market and Growth Markets became the Asia Pacific market.

Prior period amounts have been reclassified to conform with the current period presentation.

ACCENTURE 2025 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 38

Operating income for fiscal 2025 increased $630 million, or 7%, compared with fiscal 2024.

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We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during fiscal 2025 was similar to that disclosed for revenue for each geographic market.

The commentary below provides insight into other factors affecting geographic market performance and operating income, including the impact of foreign currency exchange rates where significant, for fiscal 2024 compared with fiscal 2023:

• North America operating income increased primarily due to revenue growth, lower business optimization costs and lower labor costs, partially offset by a decline in consulting contract profitability and higher acquisition-related costs.

• EMEA operating income increased primarily due to the positive impact of foreign currency exchange rates which resulted in an increase in U.S.

dollar revenues, lower labor costs and lower business optimization costs, partially offset by declines in consulting revenues in local currency and consulting contract profitability.

• Growth Markets operating income decreased as revenue growth in local currency and lower labor costs were more than offset by lower contract profitability and the negative impact of foreign currency exchange rates which resulted in a decline in U.S.

dollar revenues.

Additionally, operating costs for our geographic markets increased in line with revenues.

The commentary below provides insight into other factors affecting geographic market performance and operating income for fiscal 2025 compared with fiscal 2024:

• Americas operating income increased due to revenue growth, partially offset by higher business optimization costs.

• EMEA operating income increased due to revenue growth and lower business optimization costs.

• Asia Pacific operating income increased due to revenue growth and lower business optimization costs.

Operating Income and Operating Margin Excluding Business Optimization Costs (Non-GAAP)

The business optimization costs reduced operating margin for fiscal 2024 and 2023 by 70 and 170 basis points, respectively.

Adjusted operating margin for fiscal 2024 increased 10 basis points to 15.5% compared with fiscal 2023.

The business optimization costs reduced operating margin for fiscal 2025 and fiscal 2024 by 90 and 70 basis points, respectively.

Adjusted operating margin for fiscal 2025 was 15.6% compared to adjusted operating margin for fiscal 2024 of 15.5%.

(in millions of U.S.

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(Non-GAAP) Increase

North America $ 4,952 $ 68 $ 5,021 16 % $ 4,474 $ 465 $ 4,939 16 % $ 82

Americas (3) $ 5,324 $ 420 $ 5,745 16 % $ 5,080 $ 83 $ 5,163 16 % $ 582

EMEA 3,091 132 3,223 13 2,804 249 3,052 13 171

Growth Markets (2) 1,840 122 1,961 17 1,853 160 2,013 17 (51)

Asia Pacific (3) 1,810 63 1,873 19 1,713 107 1,819 19 54

Total $ 10,226 $ 615 $ 10,841 15.6 % $ 9,596 $ 438 $ 10,034 15.5 % $ 807

Amounts in table may not total due to rounding.

(1) Costs recorded in connection with our business optimization initiatives, primarily for employee severance.

(1) Costs recorded in connection with business optimization actions initiated in fiscal 2025, including $344 million for employee severance associated with headcount reductions we are making in a compressed timeline and $271 million for asset impairments primarily related to the divestiture of two acquisitions in the Americas that are no longer aligned with our strategic priorities.

(2) Costs recorded in connection with business optimization actions initiated in fiscal 2023 and completed in fiscal 2024, primarily for employee severance.

(3) During the first quarter of fiscal 2025, our Latin America market unit moved from Growth Markets to North America.

With this change, North America became the Americas market and Growth Markets became the Asia Pacific market.

Prior period amounts have been reclassified to conform with the current period presentation.

Interest Income

Interest income for fiscal 2025 was $336 million, an increase of $64 million, or 24%, over fiscal 2024.

The increase was primarily due to a higher average cash balance.

Interest Expense

Interest expense for fiscal 2025 was $229 million, an increase of $170 million over fiscal 2024.

The increase was primarily due to an increase in long-term debt.

Other Income (Expense), net

Other income (expense), net primarily consists of foreign currency gains and losses, non-operating components of pension expense, as well as gains and losses associated with our investments.

During fiscal 2024, Other income (expense), net decreased $206 million from fiscal 2023, primarily due to lower gains on investments.

ACCENTURE 2024 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 45

During fiscal 2025, Other income (expense), net decreased $47 million, or 43%, from fiscal 2024, primarily due to higher gains on investments.

Income Tax Expense

The effective tax rate for fiscal 2025 was 23.7%, compared with 23.5% for fiscal 2024.

Income Tax Expense Excluding Business Optimization Costs and Investment Gain (Non-GAAP)

Income Tax Expense Excluding Business Optimization Costs (Non-GAAP)

Excluding the business optimization costs of $615 million and related reduction in tax expense of $126 million, our adjusted effective tax rate was 23.6% for fiscal 2025.

Excluding the business optimization costs of $1,063 million and related reduction in tax expense of $247 million, and the investment gain of $253 million and related tax expense of $9 million, our adjusted effective tax rate was 23.9% for fiscal 2023.

Excluding the business optimization costs of $438 million and related reduction in tax expense of $111 million, our adjusted effective tax rate was 23.6% for fiscal 2024.

ACCENTURE 2025 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 39

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests reflects the income earned or expense incurred attributable to the equity interest that some current and former members of Accenture Leadership and their permitted transferees have in our Accenture Canada Holdings Inc.

See “Business—Organizational Structure.” Noncontrolling interests also includes amounts primarily attributable to noncontrolling shareholders in our Avanade Inc.

See “Business—Organizational Structure.” Noncontrolling interests also include amounts primarily attributable to noncontrolling shareholders in our Avanade Inc.

Net income attributable to Accenture plc represents the income attributable to the shareholders of Accenture plc.

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For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Earnings Per Share Excluding Business Optimization Costs and Investment Gain (Non-GAAP)

The business optimization costs of $327 million, net of related taxes, decreased diluted earnings per share by $0.51 for fiscal 2024.

Adjusted diluted earnings per share were $11.95 for fiscal 2024.

The business optimization costs of $816 million, net of related taxes, decreased diluted earnings per share by $1.28 and the investment gain of $244 million, net of related taxes, increased diluted earnings per share by $0.38 for fiscal 2023.

Adjusted diluted earnings per share were $11.67 for fiscal 2023.

FY24 As Reported $ 11.44

Earnings Per Share Excluding Business Optimization Costs (Non-GAAP)

The business optimization costs of $489 million and $327 million, net of related taxes, decreased diluted earnings per share by $0.78 and $0.51 for fiscal 2025 and fiscal 2024, respectively.

Adjusted diluted earnings per share were $12.93 and $11.95 for fiscal 2025 and fiscal 2024, respectively.

2024 As Reported $ 11.44

Business optimization costs 0.69

Tax effect of business optimization costs (1) (0.18)

FY24 As Adjusted $ 11.95

FY23 As Reported $ 10.77

2024 As Adjusted $ 11.95

2025 As Reported $ 12.15

Business optimization costs 0.98

Gain on an investment (0.40)

Tax effect of business optimization costs and gain on an investment (1) (0.37)

FY23 As Adjusted $ 11.67

Amounts in table may not total due to rounding.

(1) The income tax effect of business optimization costs and gain on an investment include both the current and deferred income tax impact and was calculated by using the relevant tax rate of the country where the adjustments were recorded.

The increase in adjusted diluted earnings per share is due to the following factors:

FY23 As Adjusted $ 11.67

Tax effect of business optimization costs (1) (0.20)

2025 As Adjusted $ 12.93

(1) The income tax effect of business optimization costs includes both the current and deferred income tax impact and was calculated by using the relevant tax rate of the country where the adjustments were recorded.

The increase in adjusted diluted earnings per share for fiscal 2025 compared to fiscal 2024 is due to the following factors:

2024 As Adjusted $ 11.95

Higher revenue and operating results 0.97

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Lower effective tax rate 0.01

Higher non-operating income 0.02

Higher net income attributable to noncontrolling interests (0.03)

FY24 As Adjusted $ 11.95

ACCENTURE 2024 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 46

Lower non-operating income (0.07)

2025 As Adjusted $ 12.93

Our operating income and diluted earnings per share are affected by currency exchange rate fluctuations on revenues and costs.

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• take advantage of opportunities, including more rapid expansion;

• develop new services and solutions;

• develop new solutions and services;

• repay outstanding borrowings and other debt.

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Operating activities:

The $393 million decrease in operating cash flows was primarily due to changes in operating assets and liabilities, including receivables from clients and contract assets, partially offset by higher net income.

The $2,343 million increase in operating cash flows was primarily due to higher net income and lower cash outflows for certain compensation payments compared to the prior year.

Investing activities:

The $4,439 million increase in cash used was primarily due to higher spending on business acquisitions.

The $5,042 million decrease in cash used was primarily due to lower spending on business acquisitions.

For additional information, see Note 6 (Business Combinations and Dispositions) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Financing activities:

The $418 million increase in cash used was due to higher cash dividends paid and net purchases of shares, as well as higher purchases of noncontrolling interests, partially offset by higher net proceeds from borrowings.

The $3,115 million decrease in cash used was primarily due to higher net proceeds from borrowings.

For additional information, see Note 14 (Shareholders’ Equity) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

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Domestic cash inflows for our Irish parent, principally dividend distributions from lower-tier subsidiaries, have been sufficient to meet our historic cash requirements, and we expect this to continue into the future.

Borrowings and Indebtedness

On September 30, 2024, we filed a registration statement on Form S-3, pursuant to which Accenture plc’s wholly owned finance subsidiaries Accenture Capital and Accenture Global Capital DAC may issue debt securities.

As of August 31, 2025 , we had outstanding long-term debt in the form of senior unsecured notes issued by Accenture Capital in an aggregate principal amount of $5 billion, which mature from 2027 through 2034.

Accenture plc fully and unconditionally guarantees these notes, as well as all future debt securities that may be issued by these entities.

For additional information regarding our outstanding borrowings, credit facilities and other debt, see Note 10 (Borrowings and Indebtedness) to our Consolidated Financial Statements under Item 8, “Financial Statements and supplementary Data.”

ACCENTURE 2025 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 41

Share Purchases and Redemptions

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Share repurchases may be made from time to time through open-market purchases, in respect of purchases and redemptions of Accenture Canada Holdings Inc.

exchangeable shares, through the use of Rule 10b5-1 plans and/or by

ACCENTURE 2024 FORM 10-K

Management's Discussion and Analysis of Financial Condition and Results of Operations 48

exchangeable shares, through the use of Rule 10b5-1 plans and/or by other means.

The repurchase program may be accelerated, suspended, delayed or discontinued at any time, without notice.

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Subsequent Events

See Note 10 (Borrowings and Indebtedness) and Note 14 (Shareholders’ Equity) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

See Note 14 (Shareholders’ Equity) to our Consolidated Financial Statements under Item 8, “Financial Statements and Supplementary Data.”

Obligations and Commitments

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis