Accenture Sees Q3 Sales Grow to $10.8B On Strength of Tech Unit

Accenture reported solid third-quarter sales and profits on the back of strong sales in its communications, media, and technology division, which saw double-digit growth, the company said in an earnings call this morning.

"We talked a lot about CMT over the last few years,’ Accenture Chairman and CEO Pierre Nanterme told analysts. ’Needless to say, it’s a set of industries under massive transformation. Software and platforms are the driving growth in terms of CMT, because these companies are investing massively in the context of leading in the market... We’re supporting them and supporting their growth.’

The Dublin, Ireland-based consulting and professional services firm saw third-quarter revenue of $10.83 billion, an increase of 16 percent over the year ago quarter -- beating estimates of $10.04 billion. The company's net income rose to $1.05 billion from $704.8 million a year ago during the quarter, which ended May 31. Accenture shares spiked 6 percent to $164 per share as of press time.

Sales in the company's communications, media, and technology unit alone grew 22 percent versus the same quarter in 2017. Nanterme said telecom in particular is in the midst of a transition and faces significant challenges as companies embark on MNAs, while simultaneously upgrading their networks.

’They’re all launching new networks,’ he said. ’We’re moving from the 3s to the 4s to the 5G. You put the fiber on top of it so they need to continue investing and again they need people like us to shift all that transformation as well as being an enabler of their network implementation.’

Nanterme also said that digital, cloud and security services now account for approximately 60 percent of total revenues. "We continue to invest to build highly differentiated capabilities and capture new growth opportunities," he said in a statement. "These investments and our innovation-led approach position us very well to continue gaining market share and delivering value for our clients and shareholders.’

Accenture Chief Financial Officer David Rowland said Accenture would allocate between $650 million to $750 million to mergers and acquisitions. He also said the company dedicates up to 25 percent of its operating cashflow to that objective.

’We’re fine with that. We’re not in the business of trying to do deals for the sake of doing deals,’ he said. ’We want to do the right deals, so that’s the level we’re going to be at this year. We always have an active pipeline, and that’s true today. Its something we continue to focus on as an important part of our strategy.’

When asked to characterize this quarter’s growth, Rowland said it was driven by both new bookings as well as renewals. Accenture made 13 deals valued at $100 million or more, he said.

’Anytime we have a bookings quarter that large it has some impact on the pipeline,’ he said. ’We have had a lot of replenishment even during the quarter, so we feel good about our pipeline, but yet as you can imagine we’re very focused on our pipeline replenishment, as we think about turning the page into fiscal 19 and lets say the next challenge of growth.’