Accenture GenAI offering sees momentum in Q1 FY24, signs $450 mn bookings

The growth trajectory in Q1 for GenAI is of significance for the top IT services players who are eyeing this segment as the next growth area

Amid an uncertain economic growth and slow IT spends, IT services and consulting firm Accenture’s first quarter numbers in FY24 showed a significant pick up in generative AI (GenAI) spends.

The company reported that it signed $450 million of new bookings in GenAI for the first quarter. This is a surge from the $300 million signed in the whole of FY23.

“We continue to lead our industry in Gen AI — the great accelerator of reinvention — with over $450 million in new bookings. Demand for GenAI continued to accelerate in Q1. For many of our clients, 2023 was a year of GenAI experimentation. We are now focusing on helping our clients in 2024 realise value at scale,” said Julie Sweet., chair and chief executive officer (CEO), Accenture, during an analyst call post the earnings.

Sweet also said that the company will be looking at acquisitions to bolster its AI portfolio along with training its employee base.

“We will be doubling our deeply skilled data and AI practitioners from 40,000 to 80,000, with an additional 5,000 practitioners as of Q1,” she said.

“Clients want to get out of the proof of concept segment and look at scale. The year 2024 will see a shift for our clients from experimentation to scale,” added Sweet.

The growth trajectory in Q1 for GenAI is of significance for top IT services players, who are eyeing this segment as the next growth area.

During the Q2FY23 results, TCS had said that it has 250 opportunities in the pipeline. The management had stated that most of these are at PoC stage. Similarly, Infosys had stated that its genAI offering thorugh Topaz platform is doing well in terms of acceptance among clients.

Accenture, while maintaining its full year growth guidance, said that technology spending is increasing. However, the speed of increase is not as fast as in the last few years.

For Q1 of FY24 (company follows a September-August calendar) Accenture reported revenue of $16.2 billion, up 3 per cent year-on-year (Y-o-Y). On a sequential basis, it reported a revenue growth of 1.23 per cent. For Q4 of FY23, revenue stood at $16 billion.

In the US, new bookings during the quarter were at $18.4 billion, an increase of 14 per cent. Order booking in the last quarter was at $16 billion.

The new bookings were driven by management services and consulting.

While the new area of GenAI was on a growth trajectory, the company confirmed that the softness in discretionary spends will continue and growth will be seen in the second half of the year.

“We do see some differences this year, particularly in Europe, Middle East, Africa (EMEA) and the UK. In the UK, we are focused on repositioning our business back to growth, but that is going to take some time. The operating environment is the same, and that means discretionary spend and decision making are slow. We, however, see strong growth in the second half of this year,” said KC McClure, chief financial officer on the analyst call.

This is not good news for Indian IT services players, who have been struggling to grow. The only positive is that growth may continue in H2. This means growth will be back for Indian IT only in FY25. This has been pointed out by several analysts in India.

We believe discretionary demand is unlikely to recover meaningfully in 2HFY24F and likely in the early part of FY25F for India IT, and maintain our cautious stance. While growth for large-cap should improve in FY25F (+6.8% y-y) vs FY24F (+1.7% y-y), we expect it to be driven by cost take-out deals ," said a report by Nomura.

Accenture continued to see its attrition fall — it was 11 per cent for the quarter. This is one of the lowest in the last eight quarters. Accenture also added 10,222 people during the quarter, taking its total headcount to 743,041.

Pointers 
 

--Accenture announced $3bn investment in data and AI over 3yrs

--Part of this will go in training and acquiring AI capabilities

--TCS in Q2FY24 said it has over 250 opportunities in pipeline; & trained 100,000 employees in genAI

--Infosys’ Topaz is the AI platform. It has 80 ongoing projects in GenAI; trained 40,000 employees & plans to train the entire company on this tech

--Wipro announced investment of $1bn over 3yrs. Launched Wipro ai360, an AI first ecosystem; will train 250,000employees on AI over next 12 months