Accenture Plummets as Forecast Highlights Pressure on Consultants

For Accenture, which helps companies navigate disruptions, it’s personal this time. 

The IT consulting firm’s stock nosedived 18% Thursday after Accenture reported weaker-than-expected fiscal third-quarter revenue and offered a disappointing forecast. Its shares closed at $127.98, their lowest since 2017. CEO Julie Sweet told analysts that the firm took a $400 million hit to its sales in the Middle East due to conflict in the region. The company reported revenue of $18.7 billion, just below the $18.76 billion analysts had been expecting, and predicted sales of $17.75 billion to $18.4 billion for its fiscal fourth quarter, lower than the $18.47 billion Bloomberg analysts had estimated. 

Despite already heading into the earnings report on its back foot amid concerns about what artificial intelligence means for the consulting industry at large, Accenture announced it’s buying a majority stake in Dragos and acquiring runZero and NetRise to build up its cybersecurity business. Earlier this week, Morgan Stanley analysts downgraded Accenture’s stock, nodding to the company’s “product-focused” acquisition strategy. Investors didn’t seem to approve of the move either. 

Struggling  Onward

Corporate clients tightening their purse strings due to the conflict in the Middle East is just the latest headache for Accenture and its fellow consulting firms. Their stocks have tanked this year as investors worry that AI will take at least some of the jobs that these professional services firms do: 

• Stocks of IT services and consulting companies Infosys and Capgemini have both tumbled roughly 40% this year. 
• Just last week, Apollo Global Management’s co-president Scott Kleinman said on a panel at the SuperReturn conference in Berlin that consultants (alongside lawyers and accountants) are likely to be the next roles disrupted by AI. 

Some Good AI News: While AI is a thorn in Accenture’s side in some ways, it also means companies need help incorporating the new technology into their strategies. Sweet said via a press release that demand for large-scale reinvention is strong, with Accenture seeing 104 quarterly client bookings of $100 million or more year-to-date, up 13%. “We are seeing more large-scale AI transformation programs, while executing our strategy to capture new areas of growth,” she added. 

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