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Saturday, June 21, 2025

Accenture Shares Fall on Bookings Decline, Concerns over Federal Government Contract

 Accenture reported a drop in bookings in the latest quarter, prompting investor concern amid a more uncertain relationship with the federal government.

The 6% drop in bookings, a closely watched metric that measures future revenue based on contracts, came as the consulting firm on Friday posted higher sales and profit in the third quarter.

Shares declined 7.3% to $284.20, putting them on pace for the largest percentage decrease since March 21, 2024. The stock, which touched a new 52-week low of $273.19 earlier in the session, is currently the worst performer in the S&P 500.

Some of the challenges stem from the expectation that the Trump administration's cost-cutting focus will hit consulting firms with big businesses advising governments. Accenture and other consulting firms have already offered billions in cuts to their contracts in response to the administration's request for price concessions.

Accenture executives said they expect a 2% headwind in its federal business in the current quarter, after seeing an immaterial impact in the latest quarter. Chief Executive Julie Sweet said that seven of Accenture's 13 industries grew at a high single-digit rate or better in the third quarter.

Asked whether the headwind should be seen as a baseline scenario going forward, Sweet said it was too early to be making any assumptions. "This is our best data point we have right now," she said.

While Accenture manages its federal book of business, Sweet said that executives at many companies it consults with are taking a different approach these days after earlier uncertainty brought on by the tariffs.

"Our clients have moved from pause to focus and leapfrog," Sweet said. "Tech, data and AI are really rewiring organizations working in new ways, being future ready so that no matter where they are on their curve, we're helping them get to the point where they can use AI."

To meet the growing changes and adoption of artificial intelligence, Accenture said it was combining several of its services into one business unit, effective Sept. 1. The company will bring its strategy, consulting, song, technology and operations services into a single unit called Reinvention Services, which Manish Sharma, the company's current chief executive officer of the Americas, will lead as chief services officer.

John Walsh, Accenture's current global chief operating officer, will become CEO of the Americas, succeeding Sharma. Kate Hogan, the current chief operating officer of the Americas, will become the global COO, succeeding Walsh.

Kate Clifford, currently CHRO of the Americas, will become the global chief leadership and human resources officer, succeeding Angela Beatty, who has decided to leave Accenture to pursue other opportunities.

Accenture logged net income of about $2.2 billion, or $3.49 a share, for the third quarter ended May 31, compared to $1.93 billion, or $3.04 a share, in the prior-year period. Analysts polled by FactSet expected $3.32 a share.

Revenue rose to $17.73 billion from $16.47 billion. Analysts polled by FactSet expected $17.31 billion.

New bookings for the third quarter came in at $19.70 billion, a decrease of about 6% in dollars and down 7% in local currency compared to the prior-year period.

For the fourth quarter, Accenture forecast revenue between $17 billion and $17.6 billion. Analysts polled by FactSet expected $17.06 billion.

For the fiscal year, Accenture now expects revenue growth to be between 6% and 7% and earnings per-share in the range of $12.77 and $12.89. The company previously forecast revenue growth between 5% and 7% and earnings per-share in the range of $12.55 and $12.79.

https://www.morningstar.com/news/dow-jones/202506205917/accenture-shares-fall-on-bookings-decline-concerns-over-federal-government-contract-3rd-update

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