Accenture plc 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Revenues for the first quarter of fiscal 2026 increased 6% in U.S. dollars and 5% in local currency compared to the first quarter of fiscal 2025. During the first quarter of fiscal 2026, revenue growth in local currency was very strong in Asia Pacific and solid in the Americas and EMEA. We experienced local currency revenue growth that was very strong in Financial Services and Communications, Media & Technology, solid in Products and modest in Resources, partially offset by a slight decline in Health & Public Service. Revenue growth in local currency was strong in managed services and modest in consulting. While the business environment remained competitive, pricing improved in several areas of our business. We define pricing as the contract profitability or margin on the work that we sell. In our consulting business, revenues for the first quarter of fiscal 2026 increased 4% in U.S. dollars and 3% in local currency compared to the first quarter of fiscal 2025. Consulting revenue growth in local currency for the first quarter of fiscal 2026 was driven by strong growth in Asia Pacific, modest growth in the Americas and slight growth in EMEA. Our consulting revenue continues to be driven by helping our clients accelerate their reinvention, leveraging cloud, enterprise platforms, security, AI and data, including advanced AI, as well as our change capabilities to help clients build new skills and drive the successful adoption of new processes and technologies. In addition, clients continue to be focused on initiatives designed to deliver cost savings, supply chain and operational resilience, as well as to accelerate growth and improve customer experiences. While we continue to experience demand for these services, we are seeing a slower pace and level of client spending, particularly for smaller contracts with a shorter duration. In our managed services business, revenues for the first quarter of fiscal 2026 increased 8% in U.S. dollars and 7% in local currency compared to the first quarter of fiscal 2025. Managed services revenue growth in local currency for the first quarter of fiscal 2026 was driven by very strong growth in Asia Pacific and strong growth in EMEA and the Americas. We continue to experience growing demand to assist clients with reinvented operations, application development and maintenance, and infrastructure management including cloud and security. Clients continue to be focused on transforming their operations through technology, AI and data, and leveraging our proprietary assets and platforms and talent to drive productivity and cost savings. As we are a global company, our revenues are denominated in multiple currencies and may be significantly affected by currency exchange rate fluctuations. While a significant portion of our revenues are in U.S. dollars, the majority of our revenues are denominated in other currencies, including the Euro, Japanese yen and U.K. pound. There continues to be volatility in foreign currency exchange rates. Unfavorable fluctuations in foreign currency exchange rates have had and could in the future have a material effect on our financial results. If the U.S. dollar weakens against other currencies, resulting in favorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be higher. If the U.S. dollar strengthens against other currencies, resulting in unfavorable currency translation, our revenues, revenue growth and results of operations in U.S. dollars may be lower. The U.S. dollar weakened against various currencies during the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025, resulting in favorable currency translation and U.S. dollar revenue growth that was 1.4% higher than our revenue growth in local currency. Assuming that exchange rates stay within recent ranges for the remainder of fiscal 2026, we estimate that our full fiscal 2026 revenue growth in U.S. dollars will be approximately 2% higher than our revenue growth in local currency. People Metrics Utilization Workforce Annualized Voluntary Attrition 93% 784,000 13% compared to 91% in the first quarter of fiscal 2025 compared to approximately 799,000 as of November 30, 2024 compared to 12% in the first quarter of fiscal 2025 Utilization for the first quarter of fiscal 2026 was 93%, compared to 91% in the first quarter of fiscal 2025. We hire to meet current and projected future demand. We proactively plan and manage the size and composition of our workforce and take actions as needed to address changes in the anticipated demand for our solutions and services, given that compensation costs are the most significant portion of our operating expenses. Our workforce, the majority of which serves our clients, was approximately 784,000 as of November 30, 2025, compared to approximately 779,000 as of August 31, 2025 and 799,000 as of November 30, 2024. For the first quarter of fiscal 2026, annualized attrition, excluding involuntary terminations, was 13% compared to 12% in the first quarter of fiscal 2025. We evaluate voluntary attrition, adjust levels of new hiring and use involuntary terminations as a means to keep our supply of skills and resources in balance with changes in client demand. Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 25 In addition, we adjust compensation to provide market relevant pay based on the skills of our people and locations where we operate. We also consider a variety of factors, including the macroeconomic environment, in making our decisions around pay and benefits. We strive to adjust pricing as well as drive cost and delivery efficiencies, such as changing the mix of people and utilizing technology, to reduce the impact of compensation increases on our margin and contract profitability. Our ability to grow our revenues and maintain or increase our margin could be adversely affected if we are unable to: match people and skills with the types or amounts of solutions and services clients are demanding; recover or offset (increases) in compensation; deploy our employees globally on a timely basis; manage attrition; and/or effectively assimilate new employees. New Bookings Three Months Ended Percent Increase (Decrease) U.S. Dollars Percent Increase (Decrease) Local Currency (in billions of U.S. dollars) November 30, 2025 November 30, 2024 Consulting $ 9.9 $ 9.2 7 % 5 % Managed Services 11.1 9.5 17 % 15 % Total New Bookings $ 20.9 $ 18.7 12 % 10 % Amounts in table may not total due to rounding. We provide information regarding our new bookings, which include new contracts, including those acquired through acquisitions, as well as renewals, extensions and changes to existing contracts, because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. New bookings can vary significantly quarter to quarter depending in part on the timing of the signing of a small number of large managed services contracts. The types of solutions and services clients are demanding and the pace and level of their spending may impact the conversion of new bookings to revenues. For example, managed services bookings, which are typically for multi-year contracts, generally convert to revenue over a longer period of time compared to consulting bookings. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. New bookings involve estimates and judgments. There are no third-party standards or requirements governing the calculation of bookings. We do not update our new bookings for material subsequent terminations or reductions related to bookings originally recorded in prior fiscal years. New bookings are recorded using then-existing foreign currency exchange rates and are not subsequently adjusted for foreign currency exchange rate fluctuations. The majority of our contracts are terminable by the client on short notice with little or no termination penalties, and some without notice. Only the non-cancelable portion of these contracts is included in our remaining performance obligations disclosed in Note 2 (Revenues) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Accordingly, a significant portion of what we consider contract bookings is not included in our remaining performance obligations. Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 26 Results of Operations for the Three Months Ended November 30, 2025 Compared to the Three Months Ended November 30, 2024 Revenues Revenues by geographic market, industry group and type of work are as follows: Three Months Ended Percent Increase (Decrease) U.S. Dollars Percent Increase (Decrease) Local Currency (in millions of U.S. dollars) November 30, 2025 November 30, 2024 Geographic Markets Americas $ 9,080 $ 8,733 4 % 4 % EMEA 6,935 6,412 8 4 Asia Pacific 2,727 2,544 7 9 Total $ 18,742 $ 17,690 6 % 5 % Industry Groups Communications, Media & Technology $ 3,102 $ 2,858 9 % 8 % Financial Services 3,602 3,169 14 12 Health & Public Service 3,797 3,813 — (1) Products 5,741 5,425 6 4 Resources 2,499 2,425 3 2 Total $ 18,742 $ 17,690 6 % 5 % Type of Work Consulting $ 9,415 $ 9,045 4 % 3 % Managed Services 9,328 8,644 8 7 Total $ 18,742 $ 17,690 6 % 5 % Amounts in table may not total due to rounding. Geographic Markets The following revenues commentary discusses the primary drivers of local currency revenue changes by geographic market for the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025: • Americas revenues increased 4% in local currency, led by growth in Banking & Capital Markets, Industrials and Software & Platforms, partially offset by a decline in Public Service, driven by our U.S. federal business. Revenue growth was driven by the United States. • EMEA revenues increased 4% in local currency, led by growth in Banking & Capital Markets, Insurance and Life Sciences. Revenue growth was driven by the United Kingdom and Italy. • Asia Pacific revenues increased 9% in local currency, led by growth in Banking & Capital Markets, Communications & Media and Public Service. Revenue growth was driven by Japan and Australia. Operating Expenses Operating expenses for the first quarter of fiscal 2026 increased $1,127 million, or 8%, compared to the first quarter of fiscal 2025, and increased as a percentage of revenues to 84.7% from 83.3% during the first quarter of fiscal 2025. 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 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, such as research and development to build assets, platforms and industry and functional solutions and strategic acquisitions, as well as in our people, such as total rewards and learning and professional development. Sales and marketing costs are driven primarily by compensation costs for business development activities; marketing- and advertising-related activities; and certain acquisition-related costs. General and administrative costs primarily include costs for people that are non-client-facing, information systems, office space and certain acquisition-related costs. Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Operating expenses by category are as follows: Three Months Ended (in millions of U.S. dollars) November 30, 2025 November 30, 2024 Increase (Decrease) Operating Expenses $ 15,868 84.7 % $ 14,741 83.3 % $ 1,127 Cost of services 12,545 66.9 11,867 67.1 678 Sales and marketing 1,875 10.0 1,811 10.2 64 General and administrative costs 1,141 6.1 1,063 6.0 78 Business optimization costs 308 1.6 — — 308 Amounts in table may not total due to rounding. Cost of Services Cost of services for the first quarter of fiscal 2026 increased $678 million, or 6%, over the first quarter of fiscal 2025, and decreased as a percentage of revenues to 66.9% compared to 67.1% during this period. Gross margin for the first quarter of fiscal 2026 increased as a percentage of revenues to 33.1% from 32.9% during the first quarter of fiscal 2025. The increase in gross margin was primarily due to a decrease in non-payroll costs. Sales and Marketing Sales and marketing expense for the first quarter of fiscal 2026 increased $64 million, or 4%, over the first quarter of fiscal 2025, and decreased as a percentage of revenues to 10.0% from 10.2% during this period. General and Administrative Costs General and administrative costs for the first quarter of fiscal 2026 increased $78 million, or 7%, over the first quarter of fiscal 2025, and increased as a percentage of revenues to 6.1% from 6.0% during this period. Business Optimization Costs During the first quarter of fiscal 2026, we recorded business optimization costs of $308 million, primarily for employee severance. For additional information, see Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.” 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 exclu ding the business optimization costs recorded in fiscal 2026 as we believe doing so facilitates understanding as to the impact of this item 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. Operating Income and Operating Margin Operating income and operating margin for each of the geographic markets are as follows: Three Months Ended November 30, 2025 November 30, 2024 (in millions of U.S. dollars) Operating Income Operating Margin Operating Income Operating Margin Increase (Decrease) Americas $ 1,527 17 % $ 1,377 16 % $ 150 EMEA 900 13 1,036 16 (135) Asia Pacific 446 16 535 21 (89) Total $ 2,874 15.3 % $ 2,948 16.7 % $ (75) Amounts in table may not total due to rounding. Operating income for the first quarter of fiscal 2026 decreased $75 million, or 3%, compared with the first quarter of fiscal 2025. Operating margin for the first quarter of fiscal 2026 was 15.3%, compared with 16.7% for the first quarter of fiscal 2025. Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28 Geographic Markets We estimate that the aggregate percentage impact of foreign currency exchange rates on our operating income during the first quarter of fiscal 2026 was similar to that disclosed for revenue for each geographic market. Additionally, payroll 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 the first quarter of fiscal 2026 compared with the first quarter of fiscal 2025: • Americas operating income increased due to revenue growth and lower non-payroll costs, partially offset by the impact of business optimization costs. • EMEA operating income decreased as revenue growth was offset by the impact of business optimization costs and higher non-payroll costs. • Asia Pacific opera ting income decreased as revenue growth was offset by the impact of business optimization costs and higher non-payroll costs . Operating Income and Operating Margin Excluding Business Optimization Costs (Non-GAAP) The business optimization costs reduced operating margin for the first quarter of fiscal 2026 by 170 basis points. Adjusted operating margin for the first quarter of fiscal 2026 was 17.0%. Three Months Ended November 30, 2025 November 30, 2024 (in millions of U.S. dollars) Operating Income (GAAP) Business Optimization (1) Operating Income (Non-GAAP) Operating Margin (Non-GAAP) Operating Income (GAAP) Operating Margin (GAAP) Increase (Decrease) Americas $ 1,527 $ 67 $ 1,594 18 % $ 1,377 16 % $ 217 EMEA 900 170 1,070 15 1,036 16 34 Asia Pacific 446 71 517 19 535 21 (18) Total $ 2,874 $ 308 $ 3,181 17.0 % $ 2,948 16.7 % $ 233 Amounts in tables may not total due to rounding. (1) Costs recorded in connection with business optimization actions initiated during the fourth quarter of fiscal 2025 and completed during the first quarter of fiscal 2026, primarily for employee severance. Interest Income Interest income for the first quarter of fiscal 2026 was $106 million, an increase of $30 million, or 40%, over the first quarter of fiscal 2025 primarily due to a higher average cash balance. Interest Expense Interest expense for the first quarter of fiscal 2026 was $65 million, an increase of $35 million over the first quarter of fiscal 2025 primarily due to a higher average long-term debt balance. 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 the first quarter of fiscal 2026, Other income (expense), net increased $92 million from the first quarter of fiscal 2025 primarily due to higher gains on investments. Income Tax Expense The effective tax rates for the first quarter of fiscal 2026 and 2025 were 24.5% and 21.6%, respectively. The higher effective tax rate was primarily due to reduced benefits from adjustments to prior year tax liabilities. Income Tax Expense Excluding Business Optimization Costs (Non-GAAP) Excluding the business optimization costs of $308 million and related reduction in tax expense of $57 million, our adjusted effective tax rate was 23.9% for the first quarter of fiscal 2026 . Earnings Per Share Diluted earnings per share were $3.54 for the first quarter of fiscal 2026, compared with $3.59 for the first quarter of fiscal 2025. For information regarding our earnings per share calculations, see Note 3 (Earnings Per Share) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 29 Earnings Per Share Excluding Business Optimization Costs (Non-GAAP) The business optimization costs of $250 million , net of related taxes, decreased diluted earnings per share by $0.40 for the first quarter of fiscal 2026. Adjusted diluted earnings per share were $3.94 for the first quarter of fiscal 2026. Three Months Ended November 30, 2024 As Reported $ 3.59 November 30, 2025 As Reported 3.54 Business optimization costs 0.49 Tax effect of business optimization costs (1) (0.09) November 30, 2025 As Adjusted $ 3.94 (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. Changes in adjusted diluted earnings per share for the first quarter of fiscal 2026 compared to diluted earnings per share for the first quarter of fiscal 2025 were due to the following factors: Three Months Ended November 30, 2024 As Reported $ 3.59 Higher revenue and operating results 0.29 Higher non-operating income 0.11 Lower share count 0.06 Lower net income attributable to noncontrolling interests 0.01 Higher effective tax rate (0.12) November 30, 2025 As Adjusted $ 3.94 Liquidity and Capital Resources As of November 30, 2025, Cash and cash equivalents was $9.6 billion, compared with $11.5 billion as of August 31, 2025. Cash flows from operating, investing and financing activities, as reflected in our Consolidated Cash Flows Statements, are summarized in the following table: Three Months Ended (in millions of U.S. dollars) November 30, 2025 November 30, 2024 Change Net cash provided by (used in): Operating activities $ 1,664 $ 1,022 $ 642 Investing activities (505) (386) (119) Financing activities (2,911) 2,752 (5,663) Effect of exchange rate changes on cash and cash equivalents (77) (87) 10 Net increase (decrease) in cash and cash equivalents $ (1,829) $ 3,302 $ (5,131) Amounts in table may not total due to rounding. Operating activities: The $642 million increase in operating cash flows was primarily due to changes in operating assets and liabilities. Investing activities: The $119 million increase in cash used was primarily due to higher spending on business acquisitions. For additional information, see Note 5 (Business Combinations) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Financing activities: The $5,663 million decrease in financing cash flows was primarily due to lower net proceeds from borrowings as well as an increase in the net purchases of shares. For additional information, see Note 9 (Borrowings and Indebtedness) to our Consolidated Financial Statements under Item 1, “Financial Statements.” We believe that our current and longer-term working capital, investments and other general corporate funding requirements will be satisfied for the next twelve months and thereafter through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities. Table of Contents ACCENTURE FORM 10-Q Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Substantially all of our cash is held in jurisdictions where there are no regulatory restrictions or material tax effects on the free flow of funds. 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 November 30, 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 9 (Borrowings and Indebtedness) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Share Purchases and Redemptions The Board of Directors of Accenture plc has authorized funding for our publicly announced open-market share purchase program for acquiring Accenture plc Class A ordinary shares and for purchases and redemptions of Accenture plc Class A ordinary shares and Accenture Canada Holdings Inc. exchangeable shares held by current and former members of Accenture Leadership and their permitted transferees. Our share purchase activity during the first quarter of fiscal 2026 is as follows: Accenture plc Class A Ordinary Shares Accenture Canada Holdings Inc. Exchangeable Shares (in millions of U.S. dollars, except share amounts) Shares Amount Shares Amount Open-market share purchases (1) 9,075,643 $ 2,227 — $ — Other share purchase programs — — 3,500 1 Other purchases (2) 421,017 103 — — Total 9,496,660 $ 2,330 3,500 $ 1 (1) We conduct a publicly announced open-market share purchase program for Accenture plc Class A ordinary shares. These shares are held as treasury shares by Accenture plc and may be utilized to provide for select employee benefits, such as equity awards to our employees. (2) During the first quarter of fiscal 2026, as authorized under our various employee equity share plans, we acquired Accenture plc Class A ordinary shares primarily via share withholding for payroll tax obligations due from employees and former employees in connection with the delivery of Accenture plc Class A ordinary shares under those plans. These purchases of shares in connection with employee share plans do not affect our aggregate available authorization for our publicly announced open-market share purchase and the other share purchase programs. We intend to continue to use a significant portion of cash generated from operations for share repurchases during the remainder of fiscal 2026. The number of shares ultimately repurchased under our open-market share purchase program may vary depending on numerous factors, including, without limitation, share price and other market conditions, our ongoing capital allocation planning, the levels of cash and debt balances, other demands for cash, such as acquisition activity, general economic and/or business conditions, and board and management discretion. Additionally, as these factors may change over the course of the year, the amount of share repurchase activity during any particular period cannot be predicted and may fluctuate from time to time. 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 other means. The repurchase program may be accelerated, suspended, delayed or discontinued at any time, without notice. Off-Balance Sheet Arrangements In the normal course of business and in conjunction with some client engagements, we have entered into contractual arrangements through which we may be obligated to indemnify clients with respect to certain matters. To date, we have not been required to make any significant payment under any of the arrangements described above. For further discussion of these transactions, see Note 11 (Commitments and Contingencies) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Significant Accounting Policies See Note 1 (Basis of Presentation) to our Consolidated Financial Statements under Item 1, “Financial Statements.” Table of Contents ACCENTURE FORM 10-Q Item 3. Quantitative and Qualitative Disclosures About Market Risk 31