Accenture PLC

Good day and welcome to Accenture's third quarter fiscal 2026 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad, and to withdraw your question, please press star then two. Please note, today's event is being recorded. I'd now like to turn the conference over to Alexia Quadrani, Executive Director and Head of Investor Relations. Please go ahead.

Thank you, Operator, and thanks, everyone, for joining us today on our third quarter 2026 earnings announcement. As the Operator just mentioned, I'm Alexia Quadrani, Executive Director, Head of Investor Relations. On today's call, you will hear from Julie Sweet, our Chair and Chief Executive Officer, and Angie Park, our Chief Financial Officer. We hope you've had an opportunity to review the earnings release which we issued a short time ago. Let me quickly outline the agenda for today's call. Julie will begin with an overview of our results. Angie will take you through the financial details, including the income statement and balance sheet, along with some key operational metrics for the third quarter. Julie will then provide a brief update on the market positioning before Angie provides our business outlook for the fourth quarter and full year fiscal 2026. We will then take your questions before Julie provides a wrap-up at the end of the call. We're also pleased to announce that we will host our Investor Day in New York City on October 14th. More details to come. Some of the matters we'll discuss on this call, including our business outlook, our forward-looking, and as such, are subject to known and unknown risks and uncertainties, including but not limited to those factors set forth in today's news release and discussed in our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings. These risks and uncertainties could cause actual results to differ materially from those expressed in this call. During our call today, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors. We include reconciliations of these non-GAAP financial measures where appropriate to GAAP in our news release or in the investor relations section of our website at Accenture.com. As always, Accenture assumes no obligation to update the information presented on this conference call. Now let me turn the call over to Julie.

Thank you, Alexia, and everyone joining us this morning. And thank you to our more than 798,000 people for your extraordinary work. Before Angie takes you through the detailed numbers, I will give you some color on the quarter and on the progress we're making on our growth strategy. In Q3, we delivered strong results with broad-based revenue growth across geographic markets, industry groups, and types of work, and once again took significant market share, underscoring the relevance of our services and our strong competitive position. To put our performance in context, we added approximately $1 billion in revenue in Q3 over FY25, and $3.4 billion year to date over the same period last year. We also delivered strong margin expansion, EPS growth, and free cash flow while continuing to invest in our business and our people. This quarter, we had 30 clients with quarterly bookings over $100 million, bringing us to 104 of such bookings year to date, a 13% increase over the same period last year. This is one of the best indicators of the depth of our client relationships and the scale of the reinvention programs we are helping deliver. I also want to give you context on two factors that impacted our results this quarter. First, we were impacted by the conflict in the Middle East. We saw revenue impact of approximately $100 million compared to our expectations, which was all consulting type of work, split evenly between the direct impact on our Middle East business and indirect effects outside of the region. In the last few weeks of the quarter, we saw this indirect impact globally in products and to a lesser degree in resources, mostly in discretionary spend. In addition, sales in the Middle East were impacted by approximately $400 million and also in EMEA due to longer decision-making. Second, a couple of our large managed services opportunities moved into FY27 for company-specific reasons. Now, on acquisitions, because of the exciting OT cybersecurity acquisitions we announced today, which I'll talk about in a moment, we now expect to deploy approximately $9 billion of capital this year based on the anticipated closing dates of the acquisitions. We are also adding important capabilities in other strategic areas of growth, including our recently announced acquisitions of Alpha Health, a service-led digital health platform in Italy, and Whaler, a leading creator and social agency in the Americas. I am also thrilled to congratulate our approximately 124,000 people who were promoted this fiscal year, a 30% increase over last year, including more than 900 who were promoted to managing director. our people make the difference in our ability to deliver our results and value to our clients. All in all, we are pleased with how we're executing in this environment. Now let's turn to how we're executing our growth strategy to be the reinvention partner of choice for our clients and the leader in the widespread adoption of AI. And I want to provide a few examples of how we're capturing new areas of demand in the age of AI, what we're doing to expand our total addressable market, and the areas where we are shifting to more non-FTE commercial models over time. We believe that AI will be a tailwind for us and our industry as it scales, because it is a catalyst for reinvention and is creating new opportunities for growth and efficiency for our clients and for us. We are building a stronger foundation every quarter for us to win as AI adoption scales. Let me walk you through some examples. we're starting to see clients who have more advanced digital cores move to larger AI transformation programs. You can see this demand in several significant AI-focused wins across multiple industries and markets, which we publicly announced with companies like British Telecom Group, Mitsubishi Chemical, NSK, Perius, Delantis, Tepco, Vodafone, and the Women's Tennis Association. The major theme of all of these programs is that we are moving clients from using AI to running on AI. We're also seeing more clients move from pilots to production. And all of this is happening even as AI is still in the early innings. This quarter, we saw another 100 clients initiate advanced AI projects with us. We have announced a number of expansions of partnerships with our top 10 ecosystem partners in AI and data. And our revenue growth from these partners continues to outpace our overall growth. We are also on track to more than double our bookings from our key emerging AI and data partners compared with FY25, including Anthropic, Databricks, Gemini, Mistral AI, NVIDIA, OpenAI, Palantir, and Snowflake. We are deepening these partnerships around specific areas of opportunity where we can combine their technology with Accenture's industry, functional, and delivery expertise. Now, let's talk about our big move in OT security to create a platform-led growth business with a non-FTE commercial model. This morning, we announced that we are acquiring a majority stake in Dragos, a leading platform for operational technology, or OT, cybersecurity. and Olive Run Zero, a leading vulnerability and exposure assessment firm, and NetRise, a leader in device security. Together, these acquisitions will create a first-of-its-kind OT security platform that lets clients see threats, find vulnerabilities, and fix them before it becomes a crisis. Cyber is a key enabler for AI. We cannot have an AI revolution without critical infrastructure, and you cannot have those without OT security, which is where today the world is most vulnerable. The urgency is real. AI and geopolitical risk are accelerating the need for cybersecurity adoption for the operational technology that underpins critical infrastructure and industrial operations, such as power grids, pipelines, manufacturing, distribution facilities, and data centers. Dragos, which is the anchor of our strategy, has strong ecosystem relationships with our top ecosystem partners, including AWS, CrowdStrike, Microsoft, Palo Alto, and ServiceNow, which we will leverage to scale. Our expansion into the OT cyber platform business builds on our strong foundation of cybersecurity services, including OT. We have grown our services organically and inorganically over the last decade from roughly $700 million in FY16 to $10 billion in fiscal 2025, a 35% CAGR over the period, four times that of Accenture's over the same period. This investment more than triples our total addressable market in OT security, which is growing double digits. We are also expanding our total addressable market by going after a new exciting customer segment, the mid market. We estimate that the mid market, which we look at as companies with between 300 million and 3 billion of revenue, is a $240 billion addressable market for us, growing high single digits. That is why we are launching a new business next week called Accenture Edge. This business will embed Accenture's large enterprise expertise and ecosystem relationships in business solutions designed specifically for the mid-market. We see that companies in this segment face many of the same technology, data, AI, cybersecurity, and productivity challenges as large enterprises, but they often need solutions that are faster to deploy, more repeatable, and right size for their scale. This segment is also an important priority for our ecosystem partners. which sees strong demand and want to partner with us because we can bring scale, consistency, and delivery quality to a fragmented services market. Accenture Edge will also include seamless integration with Accenture's joint venture with Microsoft, Avanade. Avanade will continue to serve as the provider of Microsoft platform services to mid-market clients, bringing deep cloud and security and AI expertise to help companies adopt AI at speed and scale. Together, these actions show how we are building a strong foundation for us to win in AI, expanding our addressable market across new growth areas and client segments, and evolving towards more non-FTE revenue over time. We believe this positions Accenture well for our next phase of growth. Over to you, Angie.