Accenture's fiscal 2027 growth guide looks familiar, but more of it is bought than last year

The growth guide looks familiar; the mix does not

On 1 October Accenture guided fiscal 2027 revenue to grow 3% to 6% in local currency, and said part of that would come from acquisitions. Take out the purchased part and, by our arithmetic, organic growth is guided at 0.5% to 4.0%.

Last year's opening guide, treated the same way, sits a little below that. Opening guide to opening guide, organic growth is guided slightly higher, but last year's guide carried a 1 to 1.5 point federal headwind that has now ended, so the underlying organic guide is lower; what rises is the acquired share. On the call the company did not size what federal will add in the new year.

Last year's June guide was beaten

Last year's opening range was low, and the company finished at the top of it: growth came in at 5% in local currency, above the 3% to 4% it guided in June. In the final quarter, revenue finished above the top of its guided range.

Asked what caused that, the chief executive listed small deals, faster starts on new contracts, some acquisitions, the federal business and staff carrying over paid leave. The chief financial officer added that no one factor was material. A beat that management says had no one material cause is hard to carry into next year's range.

The purchased growth is paid for with new debt

In June the chief financial officer guided about $9 billion of acquisitions for the year, on condition that the cyber deals closed in it; the year ended at $4.94 billion, with part of the deals slipping into September on regulatory timing. For the new year the plan, with the deals that closed in September, comes to about $8 billion by our arithmetic.

The company raised new debt in the quarter, and long-term debt is now roughly double a year earlier at $10.0 billion. Its prospectus said the proceeds were for general corporate purposes, including funding acquisitions, though the call tied it to no particular deal. Goodwill now equals most of shareholders' equity, by our arithmetic.

Pricing slipped; the per-share lift is largely in the count

Pricing was stable over the year, the chief executive said, but lower in many areas in the final quarter, and the margin guide assumes continued intense competition. Last year's adjusted margin gain was small, with selling-cost savings partly offset by higher general and administrative costs, by our arithmetic.

With price lower and underlying organic growth guided lower, the per-share lift rests on purchases and buybacks. GAAP diluted earnings per share are guided up 3% to 6% on last year's adjusted figure, and with about 3% fewer shares the count supplies half to all of that rise, by our arithmetic.

What would have to be true, and what we do not yet know

For the guide to hold, the acquired revenue must arrive on schedule, organic growth must hold with pricing lower, and a further round of deals must be found at sensible prices. If purchased revenue disappoints, the goodwill on the balance sheet is what an owner is left holding.

Neither how much federal will add nor how large the price decline was is given on the call or in the release. The first check is first-quarter revenue against its guided range.

Revenue has come in at or above the top of its quarterly range in four of the last five quarters by the company's own description, and only this quarter did it call revenue above the range; a range says less than what it is made of. Last year's guide carried a federal drag, and this year's carries a larger share of purchased growth. In June the company guided to roughly twice the acquisition spending it then delivered, and it guided the same 3% to 6% as last year's opening range excluding federal, while the share of that range it buys went up. Two years ago the same 3% to 6% opening guide carried a bit more than 3 points of acquisitions, so the bought share is up on last year, not on the longer run.