Accenture’s Big Bet on Generative AI Pays Off with $3 Billion in Bookings

Accenture has seen significant success with its investments in generative AI (Gen AI), reporting strong revenue growth for both the quarter and the year ending in August. While the world is showing growing interest in this technology, companies remain cautious about fully adopting it due to the uncertain economic environment.

Bengaluru: Accenture Plc, the world’s leading software services company, achieved $1 billion in generative AI bookings for the quarter ending in August. This brought its total for the year (September-August) to an impressive $3 billion.

Despite some dips in overall revenue, this surge shows how intrigued businesses are by Gen AI, even though they’re being careful about diving in too quickly.

Generative AI now accounts for 4% of the company’s total $81.2 billion order bookings, which is a 12.5% rise from the previous year. It’s a sign that this technology is steadily making its way into more boardrooms.

Julie Sweet, Accenture’s chair and CEO, couldn’t hide her excitement as she shared the numbers during the company’s earnings call. “For the full fiscal year, we had nearly $900 million in revenue from Gen AI... In FY23, we saw about $300 million in sales, with roughly $100 million in revenue coming straight from this area. Our clients have been dipping their toes into smaller deals, and we’ve been focusing on accelerating our growth.”

Accenture set the tone last year when they became the first major software company to reveal their revenue from Gen AI, securing $100 million in deals in one quarter alone. Meanwhile, other IT giants are still figuring out their strategy for embracing this emerging tech.

Accenture’s Gen AI revenue saw growth across three consecutive quarters: $400 million, $650 million, and $900 million respectively. Sweet emphasized that this growth isn't just a passing trend. “We believe Gen AI is transformative and will drive growth for us and our clients for the next decade, much like digital technologies have done over the past ten years.”

Gen AI first captured public attention with the launch of ChatGPT in November 2022, thrilling people with its ability to quickly generate video, audio, and text content just by entering a prompt. Since then, the technology has sparked curiosity, but many companies are still hesitant to fully integrate it into their day-to-day operations.

Though Accenture’s bookings show strength, analysts have noted that the technology is still largely in its experimental phase, and widespread, real-time use remains a challenge.

The broader software services sector has been struggling, with big companies holding back on tech spending due to the economic uncertainty. Accenture didn’t escape unscathed, as it narrowly missed its growth targets. The company closed the year with $64.9 billion in revenue—a modest 1.24% increase compared to the previous year. Revenue for the August quarter also saw a slight dip, dropping 0.6% to $16.4 billion.

Looking ahead, Accenture is cautiously optimistic, projecting 3-6% growth for the next fiscal year ending August 2025. However, with the global economy still in flux, this forecast reflects the challenges the company faces.

Keith Bachman, an analyst at BMO Capital Markets, noted, “The high end of Accenture’s forecast assumes stable economic conditions, but there’s room for things to get worse if the macroeconomic backdrop deteriorates.”

While some optimism came with the US Federal Reserve’s recent interest rate cuts, Sweet remained cautious, expressing concerns about the economic outlook. “We’re still in a cautious environment,” she said when asked about the return of discretionary spending. “I’m talking to CEOs almost every day, and I’m not hearing them say, ‘We’re ready to spend more.’ It’s more of the same.”

Some analysts, like Ray Wang from Constellation Research, think Sweet is playing it safe. “There’s a lot of global instability, and with the upcoming US election, companies are being careful with their budgets,” he said.

BMO’s Bachman echoed this sentiment, explaining that while companies may not be increasing their overall budgets for Gen AI, they are shifting priorities within their existing budgets. “Accenture believes that Gen AI won’t add to the total budget. CTOs and CIOs will need to decide how much of their budget should be allocated to Gen AI versus other IT projects.”

Accenture ended the year with about 774,000 employees, adding 24,000 more in the last quarter, many of whom were hired in India. Sweet hinted at plans to continue growing their workforce in the region but didn’t provide specific numbers.

In all, despite some bumps along the road, Accenture’s focus on generative AI seems to be paying off. The future may still be uncertain, but the company’s cautious optimism shows it’s ready to keep pushing forward in this exciting new era of technology.