Technology consulting titan Accenture (NYSE: ACN) has always had good timing.
Accenture’s predecessor, the consulting arm of accounting firm Arthur Andersen, conducted a feasibility study for General Electric in the early 1950s that prompted GE to become the first U.S. company to buy a computer.
In 2000, Andersen Consulting split off from the accounting firm and then changed its name to Accenture (Accent on the Future). That timing was fortuitous, as Arthur Andersen’s accounting client Enron began melting down the following year in one of the biggest corporate scandals in U.S. history. Andersen was implicated. It admitted to shredding documents and was convicted of obstruction of justice, leading to its collapse.
Technology focus
Accenture always devoted much of its energy to technology and went all in during the 2010s, with a focus on digital, cloud and security. That has turned the company into “the most dominant player in the information technology services industry, thanks to its prominent reputation, established customer base, and deep technological expertise,” Morningstar analyst Luke Yang wrote in a commentary.
He offered an excellent example of how this might play out for customers. “If a bank is planning to launch a mobile banking app, Accenture is ready to assist it throughout the entire process, which includes strategy design, IT system integration, custom application development, marketing, and digital infrastructure management,” Yang said.
“Without Accenture, customers need to source different services from several suppliers, potentially leading to project delays and cost overruns.”
But all of that hasn’t done much for Accenture’s stock price recently: it has plunged 35% in the last six months, while the S&P 500 index has gained 4%. The drop stemmed partly from a pullback in corporate spending on consulting services, as companies waited to see what would happen with tariffs. Accenture’s bookings dropped 6% in the quarter ended May 31 from a year earlier.
Government spending cuts
Accenture’s stock also suffered from federal government spending cuts, many initiated by the Department of Government Efficiency (DOGE) under Elon Musk. That’s important for Accenture, because 16% of its North American revenue and 8% of its global revenue comes from the U.S. government.
Government spending cutbacks had an “immaterial impact” on revenue in the quarter ended May 31 but will likely lower revenue by 2% in the current quarter and fiscal year ending Aug. 31, said Accenture CFO Angie Park.
Accenture earnings have withstood all the shocks so far. Revenue rose 8% in the latest quarter from a year earlier to $17.7 billion. Profit climbed 13% to $2.2 billion, and operating margin increased to 16.8% from 16.0%.
Still, the bookings decline and government cuts seem to portend trouble for Accenture in the short term. But the company’s fundamental strength may pull it forward for the long term.
Comments